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THE  AMERICAN 
BUSINESS  WOMAN 

A  GUIDE  FOR  THE  INVESTMENT,  PRESERVATION,  AND 

ACCUMULATION    OF    PROPERTY;   CONTAINING 

FULL  EXPLANATIONS  AND  ILLUSTRATIONS 

OF    ALL   NECESSARY   METHODS 

OF  BUSINESS 


BY 

JOHN  HOWARD  CROMWELL,  PH.B.,  LLB. 

COUNSELLOR-AT-LAW 


Second  RevUed^  Edkifsn 


NEW  YORK  AND  LONDON 
a  P.  PUTNAM'S  SONS 
Ube  Iknlcfterbocfter  press 

1910 


a6^^. 


^^.V^ 


Copyright,  1899,  by 
JOHN  H.  CROMWELL 

Copyright,  igio,  by 

JOHN  H.  CROMWELL 

For  Second,  Revised,  Edition 


tCbe  imiclicrbocfter  ^teM»  Hew  ll?orfc 


TO  THAT  GENUINE  AMERICAN  LADY 

THE  BEST  WOMAN  I  HAVE  EVER  KNOWN— MY  MOTHER 

THIS  WORK  IS  LOVINGLY  DEDICATED 


284631 


PREFACE  TO  THE  REVISED  EDITION 

THE  favorable  reception  which  The  American 
Business  Woman  has  received  has  made 
desirable  a  continuation  of  its  publication  after 
having  been  before  the  public  for  a  period  of  ten 
years.  The  changes  which  the  years  have  made 
in  the  laws  and  customs  affecting  some  of  the 
subjects  considered,  and  the  propriety  of  including 
in  the  new  edition  some  subjects  which  were  not 
considered  at  all  in  the  previous  editions,  have 
made  it  necessary  to  revise  and  alter  the  work 
to  a  considerable  extent. 

In  preparing  the  revised  edition  I  have  found 
that  the  changes  above  referred  to  have  been,  and 
doubtless  will  continue  to  be,  so  frequent  that  an 
attempt  to  keep  up  with  them  in  detail  would 
necessitate  a  revision  of  The  American  Business 
Woman  at  least  once  a  year.  In  the  present 
edition,  therefore,  I  have  sought  to  generalize  to  a 
greater  extent  the  subjects  which  are  involved, 
thus  lessening  the  probabilities  of  misleading 
any  one,  and  leaving  it  to  the  reader  to  seek,  if 
necessary,  more  specific  knowledge  in  manners 
which  have  been,  in  all  cases,  suggested. 


vi      Preface  to  the  Revised  Edition 

Since  the  first  publication  of  The  American 
Business  Woman  I  have  received  letters  from 
women  prominent  in  the  medical  and  journalistic 
professions;  from  women  in  other  professions  and 
business  occupations;  and  from  women  who  are 
actively  engaged  in  the  investment  and  preserva- 
tion of  their  property  —  letters  referring,  with- 
out exception,  most  favorably  to  The  American 
Business  Woman,  and  in  some  cases  suggesting 
additions  which,  in  the  opinions  of  the  writers, 
ought  to  be  included  in  subsequent  editions.  I 
desire  now  to  thank  these  successful  American 
business  women  for  their  generous  appreciation 
of  my  labors,  and  to  say  that  every  suggestion 
made  by  them  (with  the  exception  of  one,  which 
would  have  increased  the  size  of  the  book  very 
materially)  has  been  adopted  in  the  present 
edition. 

I  trust  also  that  I  may  be  pardoned  if  I  refer 
here  to  the  fact  that,  although  reviews  of  The 
American  Business  Woman  published  in  more 
than  half  a  hundred  newspapers  and  periodicals 
in  the  United  States  and  England  have  been 
brought  to  my  notice,  not  a  single  one  has  failed 
to  give  to  the  book  a  generous  and  flattering 
commendation.  For  this  unusual  consideration 
and  courtesy  I  desire  to  express  my  sincere 
appreciation. 

The  material  changes  in  the  present  revised 
edition,  both  in  the  subject-matter  itself  and  in 


Preface  to  the  Revised  Edition     vil 

the  style  and  arrangement  of  the  book,  which 
will  be  at  once  remarked  by  readers  of  the  pre- 
vious editions,  have  been  made,  with  some  hesita- 
tion, and  not  without  a  very  careful  consideration. 
I  earnestly  trust  that  these  changes  will  be  for 
the  improvement  of  the  work  and  for  the  better 
accomplishment  of  the  ptirposes  for  which  it  was 
written. 

J.  H-  C. 

New  York,  February  i,  1910. 


PREFACE  TO  THE  FIRST  EDITION 

IN  my  experience  as  a  practising  lawyer,  no  one 
fact  has  been  more  strongly  impressed  upon 
me  than  that  the  majority  of  American  women  are 
almost  entirely  ignorant  of  the  ordinary  rules 
and  methods  of  business.  In  my  practice  many 
of  my  clients  have  been  women,  and,  of  these,  I 
can  recall  but  one  whose  acquaintance  with 
regular  business  methods  would,  among  men,  be 
considered  even  ordinary ;  she  (now  a  grandmother) 
was  brought  up  almost  from  childhood  to  a  busi- 
ness which  she,  until  quite  recently,  successfully 
piirsued. 

This  lack  of  knowledge  among  women  is  not 
due  to  any  natural  deficiency.  We  cannot  reason- 
ably look  for  a  contrary  state  of  affairs  when  we 
reflect  that  for  ages  women  have  been  trained  and 
educated  in  almost  everything  except  the  principles 
of  business,  and  have  been  instructed,  if  not 
compelled,  to  leave  all  matters  of  business  to  their 
fathers,  husbands,  or  brothers. 

The  condition  is,  however,  none  the  less  lamen- 
table. Many  a  woman  who  has  been  left  in 
comfortable  circumstances  by  her  deceased  father 
or  husband,  has  been  reduced  to  poverty  and  want 


X  Preface  to  the  First  Edition 

because,  through  lack  of  education  in  matters 
of  business,  she  has  been  compelled  to  rely  upon 
the  judgment  of  others,  whose  advice,  although 
perhaps  honestly  given,  has  been  the  worst  pos- 
sible. And  many  a  woman  who  ought  to  have 
been  in  independent  circumstances  during  her 
entire  lifetime,  has  come  to  an  old  age  of  poverty 
because  of  her  inability  to  protect  herself  against 
that  army  of  rascals  to  which  a  defenceless  woman 
of  means  presents  a  golden  opportunity. 

Realizing  both  the  necessities  and  the  possi- 
bilities in  the  premises,  my  purpose  in  offering 
to  the  public  this  volume  is  to  furnish,  for  the 
women  of  my  country,  as  perfect  an  instruction 
as  I  am  able  to  give  in  all  things  relating  to  their 
pecuniary  affairs  which  I  conceive  to  be  for  their 
interest  and  welfare. 

I  have  endeavored  to  make  this  work  as  simple 
and  explicit  as  the  complicated  nature  of  some 
essential  subjects  will  permit,  believing  it  to  be 
far  better  that  some  shall  read  over  statements 
with  which  they  are  already  familiar,  than  that 
others  shall  seek  necessary  information  and  shall 
not  be  able  to  find  it. 

I  have  also  endeavored  to  avoid  the  needless 
exposition  of  legal  principles,  which  are,  however, 
so  closely  connected  with  all  the  affairs  of  property 
as  to  make  their  entire  avoidance  a  practical 
impossibility.  Whenever  it  has  been  deemed 
necessary  to  explain  legal  principles  and  methods, 


Preface  to  the  First  Edition  xi 

I  have  undertaken  to  strip  the  explanations  of 
verbiage,  and  to  bring  them  within  the  easy 
comprehension  of  all  to  whom  they  may  be  of 
service. 

Finally,  this  work  is  not  intended  to  be  in  any 
wise  an  aid  to  the  avaricious.  It  contains  no 
explanations  of  schemes  for  the  rapid  making  of 
fortunes;  no  hints  for  the  benefit  of  speculators. 
The  instructions  which  will  be  found  in  the  follow- 
ing pages  are  intended  for  those  who  need  in- 
struction in  legitimate  and  proper  methods  of 
managing  property — methods  which  will  yield  as 
large  returns  as  are  proper  and  consistent  with 
other  essential  conditions,  yet  which  are,  above 
all  other  considerations,  and  in  all  respects, 
capable  of  employment  without  unreasonable 
difficulty  and  without  risk. 

J.  H.  C. 

New  York  City,  January  i,  1900. 


CONTENTS 


CHAPTER 

I.  Introduction — Value  of  Money — 
Income  and  Expenditure — Prin- 
cipal AND  Income 


II.     Banks — The  Bank- Account 
III.     Savings  Banks 


IV.     Trust     Companies    and     Safe 
POSIT  Companies     . 


V.    The    General    Principles    of    In 

VESTMENT 


VI.  Bonds  and  Stocks     . 

VII.  Mortgages 

VIII.  Real  Property 

IX.  Landlord  and  Tenant 


X.     Descent  and  Distribution  of 
erty — Wills 

ziii 


De 


Prop- 


I 

68 

83 

94 
121 

137 

178 

255 

294 


XIV  Contents 

CHAPTER  PAGE 

XI.    Guardians,     Executors,     and     Ad- 
ministrators         ....  324 

XII.     Miscellaneous          ....  336 

Index 367 


THE  AMERICAN 
BUSINESS  WOMAN 


THE 
AMERICAN  BUSINESSWOMAN 


CHAPTER  I 


INTRODUCTION — VALUE    OF    MONEY — INCOME    AND 
EXPENDITURE — PRINCIPAL    AND    INCOME 

"l\  AONEY  was  made  to  spend,"  is  the  often- 
A  Vi     repeated  adage  of  the  fool;  but  the  wise 

man  knows  that  the  value  of  money  lies  in  its 
possession — in  the  strength  and  security  it  affords 
— in  the  blessings  and  benefits  which  it  provides. 
So  the  former  squanders  his  property,  very  often 
dies  early  and  in  poverty,  and  leaves  those  whom 
nature  has  made  dependent  upon  him  to  battle 
against  a  poverty  and  distress  for  which  they  are 
unprepared,  and  which  they  should  not  have  been 
called  upon  to  endure;  while  the  latter  enjoys 
continually  more  and  more  the  comforts  and  whole- 
some pleasures  of  life,  often  to  an  honored  old  age, 
and  leaves  those  who  are  dear  to  his  heart  safe 
against  all  the  ills  of  poverty  and  want.     Few 


4'  ■  TChe*:Aini€rican  Business  Woman 

courses  of  life  can  be  sadder  than  the  one,  few 
more  praiseworthy  and  honorable  than  the  other. 
The  great  problem  of  ages  has  been,  "  How  shall 
we  get  money?"  Equally  great  and  important  is 
another  problem, — "How  shall  we  keep  what  we 
already  have?"  or,  with  an  extended  significance, 
how  can  we  so  arrange  our  affairs  that  we,  our 
children,  and  their  children  cannot  possibly  come 
to  want? 

Income  and  Expenditure. — The  first  and 
fundamental  rule,  as  well  for  the  preservation  as 
for  the  accumulation  of  property,  is  that  we  shall, 
at  all  times,  live  well  within  our  incomes,  or,  in 
other  words,  that  we  shall  lay  by  certain  portions 
of  our  incomes  regularly  each  year.  This  principle 
applies  equally  to  persons  of  ample  means  who 
seek  merely  to  preserve  what  is  already  possessed, 
and  to  persons  in  htmible  conditions  who  strive 
providently  to  acquire  protection  against  the  ills 
and  incapacity  of  old  age.  It  follows  from  the 
universal  truth  that  in  this  life  there  can  be  no 
standing  still,  that  we  must  either  continually 
advance  or  continually  recede,  either  increase  or 
diminish  steadily  our  fortunes. 

The  disposition  to  save  money,  when  properly 
governed, — a  reasonable  spirit  of  frugality, — 
must  be  regarded  as  a  virtue.  It  presupposes 
self-denial  and  self-government,  and  gives  birth 
to  and  nurtures  consequential  virtues,  which  are 


'  Income  and  Expenditure  3 

both  numerous  and  excellent.  The  spendthrift 
is  necessarily  selfish,  indolent,  reckless,  unreliable, 
and  often  dishonest,  lawless,  and  depraved;  but 
the  frugal  man  is  unselfish,  industrious,  steady, 
and  more  often  than  otherwise  honest,  law-abid- 
ing, and  trustworthy.  Even  that  exponent  of  a 
deranged  type  of  mankind  whose  craze  permits  of 
no  intermediate  position,  the  miser,  is  a  quiet, 
peaceful,  law-abiding  citizen. 

But  aside  from  such  general  considerations, 
there  are  practical  reasons  of  the  highest  impor- 
tance for  the  necessity  of  this  fundamental  rule. 
Unexpected  misfortunes,  unlooked-for  expendi- 
tures, the  constantly  diminishing  value  of  money 
regarded  as  a  loan,  the  uncertainties  of  income 
derived  from  the  safest  and  most  permanent  kinds 
of  investments, — these  possibilities  require  our 
utmost  care  and  apprehension,  and  we  are  indeed 
in  dangerous  condition  if  we  are  not  in  some 
measure  prepared  to  meet  them  when  they  come. 

Less  than  a  quarter  of  a  century  ago,  little  diffi- 
culty was  to  be  encountered  in  loaning  money  on 
the  security  of  first-class  mortgages  in  certain 
vicinities  at  an  interest  of  seven  per  cent,  per 
annum,  and  there  was  little  or  no  loss  from  idle 
capital  waiting  for  investment ;  while  at  the  pres- 
ent time  really  first-class  loans  in  the  same 
vicinities  are  difficult  to  make  at  an  interest  of  five 
per  cent,  per  annum,  and  there  is  considerable  loss 
from  idleness.     Briefly  it  may  be  said,  and  in 


4      The  American  Business  Woman 

general,  that  the  percentage  of  actual  returns 
from  such  loans  has,  within  a  score  of  years, 
decreased  from  seven  to  about  four  and  one  half. 
Suppose  that  a  certain  person  was,  twenty  years 
ago,  possessed  of  a  property  of  fifty  thousand 
dollars,  all  of  which  was  invested  in  mortgage- 
securities.  The  annual  income  from  this  property 
would  have  been  thirty-five  hundred  dollars, 
while  at  the  present  time  it  would  not  be  more 
than  $2250.  If,  during  the  twenty  years,  the  entire 
income  from  the  property  had  been  consumed, 
the  foolish  and  improvident  person  would  now 
bemoan  the  loss  of  about  one  third  of  her  income 
in  addition  to  the  necessity  of  contemplating  a 
possible  repetition  of  the  cruel  process.  On  the 
other  hand,  if  this  person  had,  during  the  twenty 
years,  wisely  allowed  herself  an  annual  expenditure 
of  two  thousand  dollars  only,  carefully  preserving 
and  investing  the  balance  of  her  income,  her  origi- 
nal property  of  fifty  thousand  dollars  would  have 
increased  to  about  eighty-five  thousand  dollars, 
and  her  annual  income,  at  the  low  rate  of  four  and 
one  half  per  cent,  interest,  would  now  amount  to 
$3825 — an  increase  of  nearly  ten  per  cent,  over 
the  original  income,  notwithstanding  the  great 
decrease  in  the  rate  of  interest. 

As  nearly  as  can  be  estimated,  the  net  returns 
from  first  class  investments  generally  in  the  older 
civilized  portions  of  the  world  are  not  materially 
greater  than  three  per  cent,   per  anntim.     Our 


Income  and  Expenditure  5 

own  country  is  rapidly  growing  old,  and  we  must 
look  forward  to  the  inevitable  result,  i.  e.,  a  de- 
crease in  the  percentages  of  incomes  from  invest- 
ments. Computing  from  the  best  available  data, 
we  may  conclude  that  the  extent  of  decrease  in 
our  incomes  for  which  we  must  eventually  provide 
will  be  equal  to  about  one  third  of  the  incomes.  It 
follows  generally  that  all  persons  who,  in  our 
times  and  country,  shall  regularly  consume  more 
than  two  thirds  of  their  incomes  are  surely  travel- 
ling upon  the  road  to  poverty. 

Expense-Account. — In  order  that  we  may 
live  within  our  incomes  it  is  necessary  that  we 
shall  know  very  nearly  the  exact  amounts  of  our 
incomes  and  expenditures,  and  for  this  purpose  the 
keeping  of  careful  accounts  of  all  receipts  and 
disbursements  is  indispensable.  An  ordinary 
account-book,  ruled  on  the  left  of  each  page  with 
one  column  for  the  dates  and  on  the  right  with 
three  columns  for  thousands,  hundreds,  and  cents 
respectively,  will  be  sufficient  for  the  purposes  of 
the  account.  Omitting  the  first  page,  the  account 
should  be  started  on  the  second  page,  in  order  that 
the  pages  which  are  devoted  to  receipts  shall  be 
opposite  the  pages  for  disbursements  for  corre- 
sponding dates.  All  receipts  (of  income  only,  no 
part  of  the  principal  being  considered  in  this 
account)  should  be  put  down,  with  brief  descrip- 
tions and  dates,  upon  the  left  hand  pages  and  all 


6      The  American  Business  Woman 

expenditures  of  income,  with  their  proper  dates 
and  descriptions,  are  similariy  to  be  put  down 
upon  the  right  hand  pages. 

When  a  page  of  expenditures  has  been  entirely- 
filled  (there  being  usually  many  more  entries 
of  expenditures  than  of  receipts),  a  line  should  be 
drawn  across  the  unused  part  of  the  page  of 
receipts,  from  under  the  last  figures  downward 
to  the  foot  of  the  page,  to  indicate  that  the  entries 
on  the  page  are  complete;  the  sums  of  the  columns 
of  receipts  and  expenditures  should  then  be  put 
down  under  lines  drawn  below  the  respective 
columns,  and  also  carried  forward  to  the  tops  of 
the  next  corresponding  pages,  the  left-hand  pages 
being  used  for  receipts,  and  the  right-hand  pages 
for  expenditures.  When  adding  the  columns  of 
the  pages,  the  amounts  which  have  been  carried 
forward  from  the  preceding  pages  must,  of  course, 
be  included,  in  order  that  the  sum  at  the  foot  of 
each  page  shall  show  the  total  amount  of  receipts 
or  expenditures,  instead  of  merely  the  sum  of  the 
entries  on  the  particular  page.  This  process  is  to 
be  repeated  and  continued  until  the  end  of  the 
year,  when  the  annual  account  will  be  complete, 
and  the  new  account  for  the  following  year  will 
be  in  order.  At  the  top  of  each  page  of  receipts, 
in  small  figures,  and  a  little  to  one  side,  it  is  well 
to  write  the  balance,  or  difference  between  the 
total  receipts  and  the  total  expenditures .  up  to 
that  time.     The  person  keeping  the  account  will 


Income  and  Expenditure  7 

then  be  able  to  tell  at  a  glance  just  how  matters 
stand,  and  how  rapidly  her  receipts  are  gaining 
over  her  expenditures. 

A  properly  kept  expense-account  will  furnish  all 
necessary  information  as  to  the  amounts  of  receipts 
of  income  and  expenditures  and  the  balance  be- 
tween them,  at  any  time  when  such  information 
may  be  necessary,  and  the  task  of  living  well 
within  the  income,  as  required  by  the  rule,  will  then 
be  reduced  to  a  maintaining,  at  all  times,  of  the 
required  ratio  between  the  receipts  of  income  and 
the  expenditures. 

In  the  simplest  condition  of  income  and  ex- 
penditure, the  mathematical  elements  which  are 
involved  in  this  task  will  cause, but  little  difficulty. 
Thus,  if  a  person  shall  have  a  regular  income, 
say  six  thousand  dollars  per  annum,  and  the  ratio 
of  expenditures  to  income  which  shall  have  been 
decided  upon  shall  be  two  thirds  (that  is,  the 
annual  total  expenditures  shall  not  exceed  two 
thirds  of  the  annual  income),  the  account-book 
at  the  end  of  each  year  must  show  an  amount  of 
receipts  equal  to  six  thousand  dollars  and  an 
amount  of  expenditures  not  exceeding  two  thirds 
of  six  thousand,  or  four  thousand  dollars.  If  the 
expenses  of  living  are  uniform  from  month  to 
month,  the  process  may  be  still  further  simplified 
by  verifying  the  required  ratio  at  the  end  of  each 
month.  Thus,  in  the  above  illustration,  the 
monthly  income  will  be  five  hundred  dollars,  and 


8      The  American  Business  Woman 

the  monthly  expenditure  must  therefore  not  exceed 
two  thirds  of  five  hundred  dollars,  or  $333. 

Incomes  and  expenditures  are  rarely  uniform 
to  the  extent  assumed  in  the  example  which  has 
been  given;  for  the  purposes  which  are  at  present 
under  consideration,  therefore,  they  must  be 
determined  in  advance  by  careful  estimation, 
taking  into  consideration  all  possible  irregularities, 
and  making  it  certain  that  all  errors  shall  be  upon 
the  side  of  safety — that  is,  that  incomes  shall  be 
somewhat  underestimated  and  expenditures  simi- 
larly overestimated.  The  ability  to  estimate  with 
close  approximation  the  amounts  of  future  incomes 
and  expenditures  will  prove  to  be  of  great  value, 
and  this  ability  may  be  cultivated  and  improved 
by  practising  the  following  suggestion:  At  the 
beginning  of  the  year  a  careful  calculation  of  prob- 
able receipts  and  expenditures  for  each  month 
of  the  year  may  be  made,  and  a  memorandum 
made  of  the  amounts  of  income  over  and  above 
expenditures  which,  according  to  the  calculation, 
should  be  on  hand  on  the  last  day  of  each  month 
during  the  year.  On  the  last  day  of  each  month 
the  net  amount  of  income  actually  on  hand  may 
be  set  down  on  the  memorandum  opposite  the 
estimated  amount  for  that  month.  At  the  end 
of  the  year  the  memorandum  will  show  how  far  the 
ability  of  estimation  is  to  be  relied  upon  and  will 
also  offer  suggestions  for  a  more  accurate  estima- 
tion for  the  following  year. 


Principal  and  Income  9 

Of  the  two  evils  of  being  deprived  of  a  part  of 
one's  income  and  of  losing  it  all,  the  former  is  un- 
questionably to  be  chosen  whenever  there  is  a 
possibility  of  choosing.  Accordingly  the  principal 
may  be  distributed  in  various  kinds  of  invest- 
ments; but  this  principle  of  distribution  must  not 
be  carelessly  or  blindly  applied,  lest,  in  our  anxiety 
for  a  proper  variety  of  investments,  we  shall 
include  some  which  will  turn  out  disastrously. 

Principal  and  Income. — An  important  rule 
for  the  preservation  of  property  is  that  the  line 
of  distinction  which  must  separate  income  from 
principal  shall  be  kept  constantly  well  defined; 
for  if  it  is  necessary  to  save  a  portion  of  the  income 
each  year,  it  certainly  cannot  be  of  less  importance 
that  the  principal,  which  furnishes  the  income, 
shall  be  free  from  all  confusion  and  complication 
which  might  lead  to  an  encroachment  upon  and  a 
consequent  impairment  of  it. 

In  order  that  this  distinction  between  principal 
and  income  may  be  clearly  maintained,  it  is 
necessary  to  consider  what  ought  properly  to 
constitute  principal  and  what  income.  The  diction- 
ary gives  the  following  definitions, — Principal: 
property  or  capital  as  opposed  to  interest  or  in- 
come; a  sum  of  money  on  which  interest  accrues 
or  is  reckoned.  Income:  the  amount  of  money 
coming  to  a  person  or  corporation  within  a  speci- 
fied time  or  regularly,  whether  as  payment  for 


lo    The  American  Business  Woman 

services,  interest,  or  profit  from  investment; 
revenue.  For  the  purposes  of  this  volume  these 
definitions,  unless  materially  modified,  will  prove 
to  be  unsatisfactory;  for  to  the  wise  investor 
interest  will  very  often  accrue  on  money  which  is 
income  as  well  as  on  that  which  is  principal,  and  no 
careful  person  will  be  willing  to  regard  all  kinds  of 
profit  from  investment  as  income.  Definitions 
which  will  be  found  much  more  serviceable  to 
investors  are  these:  All  money  which  is  regularly 
received  either  for  the  use  of  property  or  as  com- 
pensation for  services  is  income ;  all  other  property 
is  principal.  Thus  rents,  interest,  dividends, 
royalties,  annuities,  salary,  wages,  commissions, 
professional  fees,  regular  returns  from  business,  are 
to  be  regarded  as  income;  while  capital,  gifts, 
legacies,  devises,  unusual  profits  from  investments, 
and  savings  from  income  are  to  be  accounted  as 
principal. 

In  general  it  may  be  said  that  that  which  is 
purchased  with  principal  is  still  principal  in  an- 
other form,  and  similarly  that  which  is  purchased 
with  income  continues  to  be  income.  Whatevei* 
is  of  a  permanent  nature  may  be  considered  as 
principal,  while  perishable  objects  which  must  be 
consumed  and  replaced  are  to  be  regarded  as  in- 
come. The  houses  in  which  we  live  are  parts 
of  our  principals  because  they  were  purchased 
with  parts  of  our  principals  and  are  of  a  permanent 
nature;  but  the  furniture  which  is  in  the  houses 


Principal  and  Income  ii 

may  well  be  regarded  as  income,  because  it  will 
eventually  become  antiquated  and  worn  out  and 
will  have  to  be  replaced. 

Since  regularity  or  uniformity  of  income,  at 
least  so  far  as  the  possibility  of  decrease  is  con- 
cerned, is  a  consideration  of  so  great  importance, 
an  excellent  guide  to  the  distinction  between 
principal  and  income  will  be  this  very  quality  of 
regularity.  If,  therefore,  a  profit  is  received  which 
is  unusual,  occasional,  or  which  the  possessor 
cannot  reasonably  expect  to  receive  regularly,  it 
must  be  regarded  as  a  part  of  the  principal.  If 
we  purchase  a  house  for  five  thousand  dollars  and 
sell  it  for  six  thousand,  the  profit  of  one  thousand 
dollars,  as  well  as  the  original  purchase  price,  is 
principal.  If  we  buy  Government  bonds  and  sell 
them  at  a  profit  of  five  hundred  dollars,  this 
profit  is  principal,  not  income.  If  we  find  fifty 
dollars  in  the  street,  it  should  become  a  part  of  our 
ever-growing  principal,  because  we  cannot  depend 
upon  finding  that  amount  regularly  each  year. 
If  we  buy  a  horse  and  carriage  for  our  own  use, 
they  should  be  purchased  with  income,  and  they 
will  remain  income  for  this  reason  and  also  be- 
cause they  are  not  of  a  permanent  nature;  but 
if  we  sell  them  at  a  profit  the  profit  becomes 
principal  because  we  cannot  expect  regtdarly  to 
repeat  the  operation. 

The  suggestions  which  have  been  made  for 
the  distinguishing  between  principal  and  income 


12    The  American  Business  Woman 

appear  to  be  in  all  respects  sufficient.  The  neces- 
sity that  such  distinctions  shall  generally  favor 
the  principal  is,  however,  so  important,  that  to  the 
suggestions  which  have  already  been  offered  may 
be  added  another  to  the  effect  that  whenever 
serious  difficulties  in  making  the  distinction  shall 
arise,  and  investors  shall  find  themselves  in 
quandaries,  the  most  advantageous  solution  of  the 
problem  will  be  that  which  will  place  the  doubtful 
items  to  the  credit  of  the  principals. 


CHAPTER  II 

BANKS — THE  BANK-ACCOUNT 

AN  institution  almost  indispensable  to  the 
business  woman  is  the  bank.  As  will  be 
seen  in  the  following  pages,  the  bank-account 
permits  the  business  woman  to  pay  her  bills  by 
checks  drawn  at  the  proper  times,  payable  to  the 
proper  parties,  and  for  the  exact  amounts,  thus 
avoiding  the  dangerous  necessity  of  keeping  on 
hand  considerable  amounts  of  cash,  or  the  necessity 
of  running  continually  to  the  savings  bank  or 
other  place  of  deposit,  the  often  serious  incon- 
venience of  counting  money  correctly,  difficulties  in 
detecting  counterfeit  money,  and  the  impleasant 
possibility  of  contracting  disease  from  the  hand- 
ling of  paper  money.  The  bank-account  also 
furnishes  a  convenient  and  reasonably  safe  means 
of  sending  from  place  to  place  money  by  messenger 
or  through  the  mails,  for  properly  drawn  checks 
cannot  be  collected  without  proper  indorsements 
or  forgeries  of  the  same.  It  provides  also,  by  the 
Returned  vouchers  with  the  proper  indorsements 
upon  them,  perfect  receipts  for  the  amounts  which 
have   been   paid   by   the   checks.     It   affords   a 

13 


H    The  American  Business  Woman 

comparatively  safe  means  of  carrying  about  upon 
the  person,  if  necessary,  the  equivalent  of  large 
sums  of  money;  a  simple  means  of  collecting  the 
various  checks,  drafts,  coupons,  etc.,  which  may 
be  received;  and,  in  the  check-book,  a  valuable 
reminder  of  future  obligations,  a  perfect  account 
of  receipts  and  disbursements,  and  a  valuable 
record  of  past  transactions. 

Banks  are  not  to  be  confounded  with  savings 
banks.  They  are  entirely  different  institutions, 
founded  under  different  laws,  for  different  pur- 
poses, and  with  entirely  different  methods  of 
business.  Banks  are  established  for  the  con- 
venience of  depositors,  generally  pay  no  interest 
on  deposits,  and  allow  their  depositors  to  draw 
money  by  means  of  checks  at  any  times  and  to 
any  amounts  which  are  within  the  balances  of 
the  depositors;  while  savings  banks  exist  for  the 
purpose  of  encouraging  the  saving  of  money,  pay 
interest  on  all  deposits,  have  no  such  things  as 
checks,  and  pay  money  to  depositors  only  upon 
the  presentation  of  pass-books. 

There  are  three  general  kinds  of  banks,  not 
differing  materially  in  their  manners  of  doing 
business  with  depositors,  but  differing  consider- 
ably in  other  important  respects ;  they  are  National 
banks,  State  banks,  and  private  or  individual 
banks.  National  banks  are  organized  under  the 
laws  of  the  United  States  Government,  and  are 
authorized  to  issue  the  bank-notes  which  constitute 


Banks — The  Bank-Account         15 

a  large  part  of  the  ordinary  paper  money  in  cir- 
culation among  the  people.  Bank-notes  are,  in 
fact,  promissory  notes  by  which  the  National 
banks  promise  to  pay  to  the  bearers  on  demand 
the  amounts  of  the  notes  in  coin  or  in  other 
standard  money,  and  they  are  made  good  at  all 
times  by  Government  bonds  which  are  required 
by  law  to  be  deposited,  by  the  National  banks, 
with  the  United  States  Treasurer.  State  banks 
and  private  or  individual  banks  conduct  business 
under  the  laws  of  the  States  in  which  they  are 
located,  and  have  no  authority  to  issue  bank-notes 
which  pass,  as  the  National  bank-notes,  currently 
as  money.  Private  or  individual  banks  are,  as 
the  name  indicates,  owned  and  controlled  by  in- 
dividuals or  business  firms,  and  are  conducted 
generally  (except  for  certain  restrictions  and  re- 
quirements of  the  laws)  in  the  same  manner  as  are 
ordinary  business  corporations. 

Selection  of  a  Bank. — The  selection  of  a  bank 
with  which  to  transact  the  business  of  the  bank- 
account  is  a  matter  of  great  importance,  inasmuch 
as  some  banks  are,  as  far  as  we  can  judge  at  least, 
in  sound  and  substantial  financial  conditions, 
while  others  are  in  danger  of  suspension  and 
failure  at  each  financial  crisis  and  in  times  of  con- 
tinued depression  in  business.  Unfortunately  no 
regular  method  for  ascertaining  satisfactorily  the 
financial  conditions  of  banks  can  be  set  forth,  since 


i6    The  American  Business  Woman 

evidently  the  actual  financial  conditions  of  the 
banks  depend  upon  transactions  of  which  the 
public  is  and  must  remain  for  the  most  part 
ignorant.  It  is  for  this  reason  that  suspensions 
and  failures  of  banks  usually  come  without 
warning  of  any  kind  to  the  depositors.  The 
suggestions  which  will  be  given  here  for  the  dis- 
crimination between  and  the  selection  of  banks 
will,  however,  in  the  majority  of  cases  prove  to 
be  valuable  and  sufficient. 

r  In  the  first  place,  other  things  being  equal. 
National  banks  may  be  chosen  in  preference  to 
State  banks,  and  State  banks  in  preference  to 
private  banks .  Indeed ,  the  adoption  of  the  general 
rule  to  avoid  private  banks  altogether  whenever 
such  avoidance  is  at  all  practicable  may  be  recom- 
mended without  hesitation. 

Another  important  rule  which  may  be  followed 
with  advantage  when  selecting  a  bank  is  that  all 
considerations  shall  be  confined  to  old  and  success- 
ful banks  having  large  or  considerable  capitals 
and  long-established,   high  reputations. 

The  capitals,  or  capital  stocks,  of  banks  are 
divided  into  shares  and  distributed  among  the 
several  stockholders  or  shareholders,  according  to 
the  respective  amounts  which  have  been  purchased 
by  them.  Since  the  stockholders  are  usually 
liable,  to  the  amounts  of  stock  held  by  them,  for 
the  debts  of  the  banks,  the  financial  responsibilities 
of  the  banks  will  depend  largely  upon  the  amounts 


Banks — The  Bank- Account         17 

of  their  capitals  and  upon  the  financial  characters 
of  their  stockholders;  in  these  respects,  evidently, 
banks  having  large  capitals  and  established  good 
reputations  will  ha^e  the  advantage  over  others. 

In  some  instances  banks  which  have  made  large 
profits  in  business,  instead  of  distributing  the  pro- 
fits as  dividends  to  the  stockholders,  or  using  the 
profits  to  increase  the  capitals,  have  accumulated 
out  of  the  profits  funds  which  are  called  surpluses. 
In  this  manner  certain  banks  have  become 
wealthy  and  highly  responsible  although  the 
amounts  of  their  actual  capitals  may  be  com- 
paratively small;  for  the  purpose  of  estimating 
the  responsibilities  of  such  banks,  the  surpluses 
may  to  a  certain  extent  be  considered  as  forming 
parts  of  the  capitals. 

The  rule  for  the  "selection  of  banks  which  has 
been  last  under  consideration,  will  evidently  tend 
to  preclude  from  the  list  of  satisfactory  banks 
all  such  as  are  located  in  small  cities  and  villages. 
These  must  generally  be  regarded  as  dangerous 
institutions,  and  must  be  entirely  avoided  except 
in  cases  which  practically  compel  the  making  use 
of  them. 

The  discounting  of  notes  constitutes,  to  a  greater 
or  less  extent,  a  part  of  the  business  of  nearly  every 
bank;  it  is  a  practice  which,  carelessly  piirsued, 
involves  great  risk,  and  has  been  the  actual  cause 
of  many  a  bank  failure.  The  practice  may  be 
briefly  explained  in  the  following  manner: 


i8    The  American  Business  Woman 

A  business  man  may  find  himself  in  need  of 
money  for  immediate  uses.  He  draws  and  signs 
a  promissory  note,  takes  it  to  his  bank,  and  asks 
the  bank  to  discount  it — that  is,  to  pay  him  the 
amount  of  the  note  less  a  certain  discount,  greater 
or  less,  according  to  the  responsibility  of  the 
business  man,  and  to  which  the  bank  is  entitled 
for  the  accommodation.  The  business  man  is 
expected  to  deposit  with  the  bank  some  security  or 
collateral  (such  as  Government  bonds,  railroad 
bonds,  or  stocks),  or  to  have  the  note  indorsed  by 
a  responsible  third  party,  or  both.  If  the  note, 
at  maturity,  shall  be  promptly  paid,  the  transac- 
tion will  prove  a  profitable  one  for  the  bank;  for, 
in  addition  to  the  regular  interest,  the  bank  will 
have  received  the  amount  of  the  discount.  Thus, 
tempted  by  the  prospect  of  large  profits,  and  of 
increasing  business  through  liberal  policies,  banks 
may  discount  the  notes  of  persons  who,  with  their 
indorsers  and  collaterals,  may  turn  out  to  be 
irresponsible  and  worthless,  in  which  cases  the 
banks  are  without  remedy  and  must  suffer  the 
losses. 

The  published  statements,  and  the  statements 
which  are  printed  by  the  banks  for  circulation 
among  their  depositors,  may  be  of  some  value  to 
the  depositors  in  determining  whether  their  banks 
are  prudently  managed.  If  the  statements  show 
very  large  businesses  in  the  discounting  of  notes 
or  that  the  banks  are  dealing  largely  in  dangerous 


Banks — The  Bank-Account         19 

so-called  securities,  the  accounts  should  be  at  once 
withdrawn  and  more  conservative  banks  made 
use  of. 

It  may  also  be  remarked  in  this  place  that, 
while  first-class  banks  are  generally  unwilling 
to  receive  or  maintain  the  accounts  of  persons 
whose  balances  are  uniformly  very  small,  or  who 
are  in  the  habit  of  drawing  numerous  checks  for 
very  small  amounts,  yet  the  balances  at  the  banks 
should  always  be  kept  within  proper  bounds,  more 
especially  in  times  of  panic  and  general  financial 
disaster.  All  moneys  over  and  above  reasonable 
bank-balances  should,  until  they  may  be  more 
permanently  invested,  be  deposited  in  trust 
companies,  savings  banks,  or  other  safe  de- 
positories; and  in  times  of  panic,  when  there  is 
an  unusually  large  number  of  bank  failures  and 
suspensions,  balances  in  the  banks  may  wisely 
be  reduced,  at  least  temporarily,  to  much  smaller 
amounts. 

In  some  cases  considerable  amounts  are  de- 
posited in  banks  with  the  understanding  that  the 
money  is  to  be  left  on  deposit  for  stated  periods 
of  time,  and  in  consideration  of  this  fact  the 
banks  often  pay  interest  on  such  accoimts.  These 
accounts  or  deposits  are  called  ''special"  or 
*'time"  deposits.  As  a  general  rule  they  possess 
no  advantages  over  deposits  in  trust  companies 
and  savings  banks,  and  they  are  open  to  the  serious 
objection   that   the  amounts  cannot   be  quickly 


20    The  American  Business  Woman 

withdrawn  for  the  purpose  of  depositing  them  in 
safer  places,  if  occasion  shall  make  such  action 
necessary.  In  view  of  these  facts  special  arrange- 
ments of  this  kind  may  well  be  dispensed  with 
entirely. 

The  officers  and  clerks  of  the  banks,  with  whom 
business  women  may  have  dealings,  are:  the 
president  and  cashier,  who  are*  the  executive 
officers,  and  with  whom  all  business  except  that 
of  the  bank-accounts  must  be  transacted;  the 
receiving- teller,  who  receives  deposits ;  the  paying- 
teller,  who  pays  checks  and  certifies  them  when 
requested  to  do  so;  and  the  bookkeepers,  with 
whom  bank-books  must  occasionally  be  left  to  be 
balanced. 

Opening  an  Account. — The  ordinary  method 
of  procedure  upon  opening  an  account  at  a  bank 
is  as  follows:  The  proposed  depositor  presents 
herself  at  the  bank  during  business  hours,  accom- 
panied by  a  friend  or  acquaintance  who  is  known 
at  the  bank  and  who  may  introduce  her;  or,  if 
no  such  acquaintance  shall  be  available,  she  may 
introduce  herself,  giving  her  name  and  residence, 
and  whatever  references  may  be  required,  and 
stating  that  she  desires  to  open  an  account.  She 
then  writes  the  regular  signature,  which  she  in- 
tends to  use  for  the  signing  and  indorsing  of 
checks,  in  a  book  which  is  provided  by  the  bank 
for   that   purpose;   gives   the  bank  officers  such 


Banks — The  Bank-Account         21 

further  information  as  they  may  require ;  hands  in 
the  amount  of  her  first  deposit;  and  receives 
from  the  bank  a  check-book,  a  bank-book  (in 
which  the  amount  of  her  first  deposit  has  been 
entered),  and  some  deposit  tickets.  The  books 
and  tickets  are  taken  to  her  home  by  the  depositor, 
and  the  simple  proceeding  has  been  completed. 

Signatures. — ^The  signature  (as  well  that  used 
at  the  bank  as  that  used  for  the  signing  of 
other  important  documents  and  papers)  should 
possess  two  important  qualities:  first,  it  should  be 
written  in  such  a  manner  that  it  may  be  easily 
remembered  in  all  its  details,  and  all  subsequent 
signatures  should  be  made  to  resemble  it  as  exactly 
as  is  possible;  second,  such  a  style  of  signature 
as  will  be  difficult  for  others  to  imitate  should 
be  adopted.  The  first  quaHty  will  enable  the 
clerks  and  officers  at  the  banks  readily  to  recog- 
nize the  signatures,  and  the  second  will  tend  to 
prevent  forgeries. 

The  name  should  be  written  in  full,  or  at  least 
the  full  Christian-  and  sur-names  shotdd  be  used, 
generally  without  prefix  or  addition  of  any  kind. 
The  first  name  (Christian)  and  the  last  name  (sur- 
name) are  the  necessary  names,  the  middle  names 
being  merely  additional. 

When  a  bank-account  is  kept  by  a  person  in  a 
fiduciary  capacity  (as  an  executrix,  agent,  trustee, 
or  as  treasurer  for  a  society)  the  signature  must 


2  2    The  American  Business  Woman 

include  the  distinguishing  title,  which  may  be 
either  written  in  full  or  designated  by  a  common 
or  well-known  abbreviation:  thus,  "Mary  Johnson 
Doe,  Extrx.,"  "Mary  J.  Doe,  Trustee,"  "Mary 
J.  Doe,  Treas.,"  "Mary  J.  Doe,  Agt."  When 
a  bank-account  is  kept  by  one  person  for  the 
benefit  of  another  who  is  the  real  proprietor  (as 
by  a  daughter  for  an  infirm  or  invalid  mother), 
the  former  is  the  attorney  in  fact  for  the  latter,  and 
this  fact  should  be  indicated  by  the  signature  in 
this  manner:  "Jane  W.  Doe,  by  Mary  J.  Doe, 
Attorney  in  fact,"  or  "Jane  W.  Doe,  per  Mary 
J.  Doe,  Atty.  in  fact,"  or  "Jane  W.  Doe,  by 
Mary  J.  Doe,  Atty." 

In  order  to  lessen  the  probability  of  successful 
forgeries,  signatures  which  are  used  at  the  banks 
and  for  similar  business  should  not  be  used  for 
ordinary  purposes,  such  as  the  signing  of  letters, 
messages,  etc.  Slight  but  important  differences 
(such  as  capitals  written  in  different  manners  or 
the  use  of  entire  middle  names  instead  of  initials 
only)  between  signatures  which  are  used  for  these 
different  kinds  of  purposes,  may  be  the  means  of 
detecting  and  preventing  forgeries  by  those  whose 
knowledge  of  the  particular  handwritings  comes 
from  the  inspection  of  signatures  at  the  ends  of 
letters  only. 

Bank  Checks. — A  bank  check,  or,  as  it  is  com- 
monly called,  a  check,  is  a  written  order  to  the 


Banks — The  Bank-Account         23 

bank  at  which  the  person  drawing  the  check  has 
an  account,  to  pay  on  demand  part  or  all  of  the 
deposits  to  the  depositor  or  to  some  other  person. 
The  person  who  draws  and  signs  the  check  is 
called  the  drawer  or  maker;  the  person  to  whom 
the  check  is  originally  made  payable  is  called  the 
payee;  a.  person  who  writes  his  name  upon  the 
back  of  the  check,  whether  it  be  the  payee  or  an- 
other person,  is  an  indorser;  and  the  person  to 
whom  the  check  is  made  payable  by  the  indorse- 
ment is  an  indorsee.  These  terms  are  not  all 
technically  correct,  since  some  of  them  apply 
properly  to  bills  of  exchange  and  promissory  notes 
only.  But  they  are  in  common  usage  and  are  not 
at  all  ambiguous;  they  therefore  may  be  accepted 
as  sufficiently  correct  for  all  ordinary  purposes. 

There  are  three  general  methods  of  drawing 
checks,  having  reference  to  the  manner  of  pay- 
ment :  first,  when  the  check  is  intended  to  be  paid 
to  some  person,  business  firm,  or  corporation  other 
than  the  drawer;  second,  when  the  check  is  in- 
tended to  be  paid  to  the  drawer  in  person  upon 
presentation  at  the  bank;  and  third,  when  the 
check  is  intended  to  be  paid  to  any  person  who 
may  present  it  at  the  bank,  as  when  a  messenger 
or  a  person  who  is  not  known  at  the  bank  must  be 
sent  to  cash  a  check.  In  the  first  case  the  check 
should  be  drawn  payable  to  the  order  of  the 
proper  person,  firm,  or  corporation,  by  the  correct 
name,  as  is  indicated  in  Figs,  i  and  2 ;  in  the  second 


M    The  American  Business  Woman 


SAFEmriOMLlMK 


SAFE  MTIOML  BANK 


FIG.    2. 

SAEEMTIOMLMM 

-"^^^  M^ 

^^j^  ^  //L-^ 

/  / 

FIG.    3. 


.:vf.Af/....     °        •SewX>sgs..Ji^..M.^.. 189/. 


Ws^ — ^.-....^ ^^-^ 


Fio.  4. 


Banks — The  Bank-Account         25 

case  it  should  be  made  payable  to  "cash"  or  "my- 
self," erasing  or  drawing  a  line  through  the  printed 
words  "the  order  of,"  as  in  Fig.  3;  and  in  the 
third  case  the  name  of  the  payee  should  be 
"bearer,"  the  words  "order  of"  being  erased,  as 
in  Fig.  4. 

The  blank  checks  which  are  furnished  by  the 
different  banks  for  the  use  of  their  depositors  differ 
to  a  considerable  extent  in  the  matters  of  design 
and  the  positions  of  the  various  spaces,  but  these 
variations  are  immaterial  as  far  as  the  practical 
uses  are  concerned.  Thus,  the  space  which  is 
intended  for  the  numerals  of  the  amount  (in  Fig. 
I,  $10161^75^)  may  be  at  the  foot  of  the  check  and  at 
the  extreme  left;  or  the  space  for  the  number  of 
the  check  may  be  at  the  upper  right-hand  comer. 
Checks  are  sometimes  printed  in  such  a  manner 

as  to  read  "Pay  to or  order,*' 

instead  of  "Pay  to  the  order  of  .  .  .  ." 
as  in  the  illustrations.  When  such  checks  are 
used,  those  which  are  intended  to  be  presented  at 
the  banks  for  collection  by  the  drawers  should 
read  simply  "Pay  to  cash,"  or  "Pay  to  myself," 
the  words  "or  order"  being  erased;  and  those 
which  are  intended  to  be  collected  by  strangers  at 
the  banks  should  have  the  words  "the  bearer" 
written  in  the  proper  spaces,  and  the  words  "or 
order"  should  be  erased,  so  as  to  read  "Pay  to 
the  bearer."  Checks  of  this  style,  which  are  in- 
tended to  be  paid  to  individuals  or  business  firms, 


26    The  American  Business  Woman 

must,  of  course,  be  filled  out  without  erasure,  to 
read,  for  example,  "Pay  to  William  Jones  &  Sons 
or  order." 

Probably  the  best  general  rule  is  that  un- 
necessary titles  (such  as  Mr.,  Messrs.,  Esq.,  Miss, 
Mrs.)  should  not  be  attached  to  the  names  of 
the  payees  upon  checks,  because  they  are  entirely 
superfluous.  But  there  are  occasions  when  the 
addition  of  titles  serves  to  a  certain  extent  to 
indicate  the  purposes  of  the  checks,  and  there  is 
therefore  no  objection  to  it.  For  example,  a 
check  which  is  given  in  payment  of  a  physician's 
bill  may  very  properly  be  drawn  payable  to  the 
order  of  "Dr.  Richard  Roe";  a  check  which  is 
given  to  a  clergyman  for  charitable  purposes  may 
read  "Pay  to  the  order  of  Rev.  John  Doe";  and 
a  lawyer's  retainer  may  be  paid  by  a  check  which 
is  drawn  to  the  order  of  "William  Blackstone, 
Atty.  at  law."  Checks  which  are  given  to  senators, 
members  of  Congress,  college  professors,  etc., 
may,  as  a  matter  of  compliment,  be  drawn  payable 
to  the  order  of  "Hon.  John  Doe"  or  "Prof. 
Richard  Roe." 

There  are  also  cases  in  which  the  official  titles 
of  the  payees  form  parts  of  their  proper  designa- 
tions, as  where  checks  are  to  be  paid  to  persons  not 
in  their  individual  but  in  their  official  capacities. 
In  such  cases  it  is  proper  and  necessary  as  a 
measure  of  precaution,  that  the  official  titles  shall 
be  mentioned  in  the  checks.     A  check  which  is 


Banks — The  Bank-Account         2^ 

intended  for  the  payment  of  taxes  on  real  or 
personal  property  should  read:  "Pay  to  the  order 
of  John  Doe,  City  Treas.,"  "John  Doe,  Town 
Treas.,"  "John  Doe,  Co.  Treas.,"  "John  Doe, 
Collector  of  Taxes,"  or  "Receiver  of  Taxes," 
as  the  case  may  be.  A  check  for  the  payment  of 
a  mortgage  which  is  held  by  the  estate  of  a  de- 
ceased person  should  be  made  payable  to  the  or- 
der of  "John  Doe,  Exr., "  or  "John  Doe,  Trustee" ; 
or  it  may  read  "Pay  to  the  order  of  the  Estate 
of  Richard  Roe,  Deed."  So  a  check  which  is  paid 
to  a  lawyer  in  settlement  of  his  client's  claim 
against  the  drawer  should  be  made  payable  to 
the  order  of  "William  Blackstone,  Attorney  (or 
Atty.)  for  Richard  Roe." 

Whenever  practicable,  checks  should  be  drawn 
payable  to  the  orders  of  the  persons,  firms,  or 
corporations  who  are 'intended  finally  to  .receive 
the  money  for  which  the  checks  are  given.  If 
several  individuals  shall  be  jointly  entitled  to  the 
money,  all  should  be  named  as  payees,  thus: 
"Pay  to  the  order  of  John  Doe,  Richard  Roe, 
Mary  Williams,  and  Sarah  B.  Hicks."  If  either 
of  several  persons  shall  be  entitled  to  the  money, 
in  the  alternative,  all  should  be  made  payees, 
with  the  connective  "or"  between  the  names; 
as  "  Pay  to  the  order  of  John  Doe,  or  Richard  Roe, 
or  Mary  Williams."  By  this  means  checks, 
when  they  have  been  paid  and  returned  by  the 
banks   to   the   drawers,    will   be   found   to   have 


28    The  American  Business  Woman 

been  indorsed  by  the  proper  persons,  and  they  will 
therefore  be  available  as  receipts  for  the  moneys 
paid;  the  possibility  of  collection  by  the  wrong 
parties  will  also  be  materially  diminished  by  the 
practice  of  this  precaution. 

The  drawing  of  checks  payable  to  the  bearer  is 
to  be  avoided  except  when  checks  which  are  other- 
wise drawn  will  not  be  practicable;  for  should 
they  be  lost  they  may,  as  a  general  rule,  be  col- 
lected by  the  finders  before  the  banks  can  be 
notified  of  the  losses. 

An  important  consideration  in  the  drawing  of 
checks  is  the  proper  guarding  against  the  possi- 
bility of  fraudulent  alteration,  either  by  increasing 
the  amounts,  or  by  changing  the  names  of  the 
payees.  For  this  reason  all  of  the  spaces  in  a 
check  should  be  entirely  filled  up,  either  by  the 
written  amount,  the  names  of  the  payees,  or  by 
lines  drawn  across  the  unoccupied  spaces  as  shown 
in  the  illustrations.  The  space  which  is  intended 
for  the  amount  expressed  in  letters  (called  the 
body  of  the  check,  because  it  is  considered  the  most 
important  part,  and  in  case  of  a  difference  between 
it  and  the  numerically  expressed  amount,  usually 
takes  the  precedence)  should  be  filled  up  by 
beginning  the  letters  on  the  extreme  left,  leaving 
very  little  space  before  them,  and  by  writing  the 
fraction  which  expresses  the  cents  as  near  to  the 
end  of  the  letters  as  possible.  In  the  same  manner 
no  \inoccupied  spaces  should  be  left  before,  after, 


Banks — The  Bank-Account        2g 

or  between  the  names  of  the  payees,  and  the 
figures  of  the  amount  expressed  numerically 
should  be  written  close  together,  with  no  spaces 
either  before,  after,  or  between  them  large  enough 
for  the  possible  insertion  of  figures.  In  the 
amount  of  a  check,  cents  are  properly  expressed 
by  a  fraction  having  two  figures  in  the  numerator 
and  the  numerals  loo  in  the  denominator,  as 
in  Figs.  I  to  4. 

As  an  example  of  the  fraudulent  increasing  of 
the  amount  of  a  check  (commonly  called  "raising 
the  check")  the  following  instance  may  be  given: 
In  a  check  for  the  amount  of  nine  dollars  and  f our 
cents  the  amount  was,  ignorantly  or  carelessly, 
written,  "  Nine  tJit  Dollars "  and  "$9  tK"  with 
considerable  spaces  before  the  word  " Nine"  in  the 
body  of  the  check,  and  between  the  "$"  and  the 
"9"  in  the  numerically  expressed  amount.  By 
the  skilful  insertion  of  the  word  "Ninety"  and 
the  figure  "9"  in  the  places  indicated,  the  amount 
of  the  check  was  made  to  read,  "Ninety-nine 
T*ffV  Dollars"  and  "$99  AV."  The  result  was  a 
loss  of  ninety  dollars  and  ninety  cents,  which  by 
the  exercise  of  ordinary  care,  intelligence,  or 
perception  might  easily  have  been  prevented. 

Sometimes  checks  are  so  written  as  to  contain 
memoranda  of  the  purposes  for  which  they  are 
given.  For  example,  a  check  which  is  given  in 
settlement  of  all  claims  is  made  to  read,  "Pay 
to  the  order  of  Richard  Roe,  in  full  of  all  de- 


30    The  American  Business  Woman 

mands";  or  a  check  for  professional  services, 
*'Pay  to  the  order  of  Richard  Roe,  for  professional 
services  to  date."  So  checks  are  sometimes  given 
not  for  the  purpose  of  paying  debts,  but  to  serve 
merely  as  memoranda  of  the  debts;  such  checks 
(called  memorandum  checks)  differ  in  appearance 
from  ordinary  checks  in  that  they  have  the  word 
*' memorandum"  written  across  the  faces.  These 
customs  are  not  to  be  recommended;  they  poorly 
answer  the  purposes  for  which  they  are  intended, 
for  which  much  better  means  are  always  available, 
and  they  are  often  causes  of  misunderstanding  and 
confusion. 

The  greatest  care  ought  always  to  be  taken  that 
bank  accounts  shall  not  be  overdrawn,  or,  in  other 
words,  a  uniform  and  invariable  rule  should  be 
adopted  never  to  draw  checks  unless  the  balances 
at  the  banks  shall  be  certainly  sufficient  for  the 
payment  of  the  checks.  Banks  ordinarily  will 
refuse  to  pay  overdrawing  checks  (the  checks 
will  be  dishonored),  and  if,  through  confidence 
in  and  courtesy'  to  the  drawers,  such  checks 
shall  occasionally  be  honored,  nevertheless  it 
may  be  taken  for  granted  that  the  reputations  of 
the  drawers  at  the  banks  will  be  by  no  means 
benefited  by  the  transactions. 

With  regard  to  forgeries  of  signatures  upon 
checks,  the  general  rule  is  that  if  a  bank  shall 
pay  a  forged  check  the  loss  will  fall  upon  the  bank, 
because  banks  are  presumed  to  know  or  to  ascertain 


Banks — The  Bank- Account         31 

the  correctness  of  their  depositors'  signatures, 
and  to  be  able  to  detect  forgeries ;  but  if  the  success 
of  a  forgery  has  been  contributed  to  by  the  careless- 
ness of  a  depositor,  the  bank  will  be  exonerated 
and  the  depositor  will  be  compelled  to  suffer  the 
loss.  If  a  forgery  of  a  depositor's  name  shall  be 
discovered  by  the  depositor,  the  bank  must  be 
notified  of  the  forgery  at  once ;  otherwise  the  bank 
may  be  discharged  from  liability.  In  general 
all  reasonable  care  should  be  taken  by  depositors 
to  render  the  crimes  of  forgery  and  counterfeiting 
as  difficult  as  possible,  and  also,  to  the  best  of 
their  abilities,  to  assist  the  banks  in  the  prose- 
cution of  remedies  and  in  the  punishment  of 
criminals  of  this  kind. 

Forgery  may  be  said  to  be  one  of  the  most  com- 
prehensive of  crimes.  It  is  broadly  defined  as  the 
false  making  or  altering  of  any  writing  with  intent 
to  defraud;  and  the  mere  offering  or  disposing 
of  a  forged  writing,  with  knowledge  of  the  forgery 
and  with  intent  to  defraud,  may  be  itself  a  forgery. 
The  essence  of  the  crime  of  forgery  is  evidently 
the  intent  to  defraud.  Therefore  such  acts  as  writ- 
ing names  incorrectly  when  indorsing  checks,  in 
order  that  the  indorsements  shall  correspond 
with  the  names  of  payees  which  have  been  in- 
correctly written,  are  not  forgeries,  and,  under 
circumstances  which  will  be  explained  in  the 
proper  place,  are  not  objectionable. 

The  credit  of  an  ordinary  bank  check  depends 


32    The  American  Business  Woman 

upon  the  character  of  the  drawer  only.  If  the 
drawer  is  responsible  or  honest,  the  check  will 
undoubtedly  be  duly  paid,  and  if  the  drawer  is 
irresponsible  and  dishonest  the  check  will  probably 
be  worthless.  There  are  therefore  many  occasions 
upon  which  persons  to  whom  payments  are  to  be 
made  ought  not  to  accept  ordinary  checks,  because 
of  the  difficulties  or  losses  which  may  follow 
the  dishonoring  of  the  checks.  Common  ex- 
amples of  such  cases  are  real-estate  transactions 
such  as  the  purchase  of  real  estate,  where  a  deed 
must  be  delivered  and  may  be  put  on  record  before 
the  vendor  can  collect  the  amount  of  the  check 
which  is  given  for  the  purchase  price;  the  loaning 
of  money  on  bond  and  mortgage,  where  the  legal 
papers  must  be  delivered  upon  the  receipt  of  the 
check  for  the  amount  of  the  loan,  and  the  mortgage 
may  be  recorded  before  the  check  can  be  collected 
by  the  mortgagor;  the  discharging  or  satisfaction 
of  a  mortgage,  where  the  bond  and  mortgage  must 
be  returned  to  the  mortgagor  and  a  discharge 
or  satisfaction-piece  delivered  at  the  time  of  re- 
ceiving the  check  which  is  intended  to  pay  the 
debt,  and  where  there  is  a  possibility  that  the 
bond  may  be  destroyed  and  the  mortgage  dis- 
charged of  record  before  the  mortgagee  can  make 
certain  that  the  check  will  be  paid.  In  all  such 
cases,  as  well  as  in  all  cases  where  persons  to 
whom  checks  are  to  be  paid  must  incur  impor- 
tant obligations,  relinquish  or  destroy  important 


Banks — The  Bank-Account        33 

remedies,  or  otherwise  run  the  risks  of  serious  diffi- 
culties upon  the  faith  and  credit  of  the  checks, 
certified  checks  only  should  be  accepted. 

A  check  is  said  to  be  certified  when  the  bank 
upon  which  it  is  drawn  certifies  that  there  are 
sufficient  funds  at  the  bank  to  the  credit  of  the 
drawer  for  the  payment  of  the  check,  and  that 
the  amoimt  of  the  check  will  be  reserved  by 
the  bank  for  that  purpose,  or,  in  other  words, 
when  the  bank  itself  certifies  that  the  check  is 
good.  The  process  of  having  a  check  certified 
is  as  follows:  The  check  is  regularly  drawn  and 
signed  and  presented  to  the  paying  teller  of  the 
bank  upon  which  it  is  drawn  with  the  request  to 
certify  it.  The  teller  ascertains  the  balance  of  the 
drawer  of  the  check  and,  if  the  balance  shall 
be  sufficient,  stamps  upon  the  face  of  the  check 
(usually  in  bright  red  or  blue  ink)  the  word 
*' certified"  or  **good,"  with  the  name  of  the 
bank  and  the  date  of  certification,  and  writes 
his  name  upon  the  certification.  He  then  makes 
a  memorandtim  of  the  certification  in  a  book 
which  is  kept  for  that  purpose  and  returns  the 
certified  check  to  the  person  who  has  presented 
it.  The  general  effect  of  the  certification  of  a 
check  is  to  make  the  bank  which  certifies  it  re- 
sponsible for  its  payment. 

Since  the  credit  of  a  certified  check  depends 
principally  upon  the  character  of  the  bank  which 
has  certified  it,  and  since  banks  are  not  all  equally 
^      3 


34    The  American  Business  Woman 

responsible,  obviously  there  may  be  occasions  upon 
which  certifications  should  be  rejected  as  un- 
satisfactory, as,  for  example,  where  checks  which 
have  been  certified  by  unknown  and  insignificant 
banks  are  offered  in  payment  of  large  amounts 
and  the  non-payment  of  the  checks  will  certainly 
involve  unusual  difficulties.  In  certain  cases 
also  there  may  be  reasonable  grounds  to  suspect 
the  genuineness  of  certifications.  The  way  out 
of  the  difficulty  in  cases  of  the  former  kind  will  be 
the  requiring  of  checks  which  have  been  certified 
by  satisfactory  banks  in  lieu  of  the  doubtful 
checks ;  and  the  remedy  in  cases  of  the  latter  kind 
will  be  inquiries  at  the  certifying  banks  before  the 
doubtful  certifications  have  been  accepted.  Oc- 
casions which  will  call  for  such  unusual  precautions 
are  indeed  very  rare,  and  the  rule  that  properly 
certified  checks  may  be  generally  relied  upon  will 
seldom  be  the  cause  of  serious  difficulties. 

Checks  which  are  intended  to  be  certified 
ought  evidently  to  be  correctly  and  carefully 
drawn.  They  should  be  made  payable  to  the 
orders  of  the  proper  parties,  and  if  the  names 
of  the  parties  have  not  yet  been  ascertained, 
the  checks  should  be  made  payable  to  the  orders  of 
the  drawers,  and  afterwards  indorsed  by  them 
to  the  orders  of  the  proper  parties. 

Checks  which  are  drawn  by  banks  (commonly 
called  cashiers'  checks,  because  they  are  commonly 
signed  by  the  cashiers  of  the  banks)  are  usually 


Banks — The  Bank-Account         35 

regarded  as  equivalent  to  certified  checks,  since 
the  banks  which  draw  them  are,  as  a  matter  of 
course,  responsible  for  the  payment  of  them. 
The  suggestions  which  have  been  made  for  the 
cautious  handling  of  certified  checks  will  therefore 
apply  in  all  respects  to  cashiers'  checks. 

Indorsement. — By  the  indorsement  of  a  check 
is  meant  the  writing  upon  the  back  of  the  check, 
by  the  payee,  of  an  order  for  the  payment  of  the 
check  to  some  other  party.  The  effect  of  an  in- 
dorsement is  to  make  the  new  party  an  indorsee, 
or,  in  fact,  a  new  payee.  The  original  payee  can 
no  longer  collect  the  check,  because  by  the  indorse- 
ment all  rights  to  the  check  have  been  assigned 
to  the  indorsee.  The  drawer  of  the  check  and  all 
indorsers  (generally  in  the  order  of  their  indorse- 
ment, in  point  of  time)  are  responsible  to  the  holder 
for  the  payment  of  the  check,  unless  the  indorse- 
ments shall  be  conditional  or  qualified,  as  will  be 
hereafter  explained ;  and  an  indorser  who  has  been 
compelled  to  make  good  a  check  will  have  a 
remedy  against  the  other  indorsers,  and  of  course 
against  the  drawer. 

An  indorsement  in  full  is  made  by  writing  the 
words  "Pay  to  the  order  of  John  Doe"  (John  Doe 
being  the  indorsee)  and  signing  }the  name  of  the 
indorser  across  the  back  of  the  check.  This  is  the 
correct  and  usual  style  of  indorsement  and  should 
be  used  always  except  in  some  special  cases  which 


36    The  American  Business  Woman 

will  be  mentioned  hereafter,  since  it  insures  pay- 
ment to  the  proper  parties  and  compels  indorsees 
to  indorse  the  checks  before  they  can  be  collected. 

An  indorsement  in  blank  is  one  in  which  simply 
the  name  of  the  indorser  is  written  upon  the  back 
of  the  cheek,  without  other  words.  Such  an  in- 
dorsement is  an  implied  order  to  the  bank  to  pay 
the  check  to  any  person  who  may  be  the  holder, 
and  practically  transforms  the  check  from  one 
which  is  payable  to  the  order  of  a  designated  person 
to  one  which  is  payable  to  the  bearer.  Strictly 
speaking,  no  further  indorsements  are  necessary 
for  the  payment  of  a  check  which  has  been  indorsed 
in  blank,  although  it  may  pass  through  a  dozen 
hands  before  reaching  the  bank;  nevertheless 
banks  sometimes  require  persons  presenting  such 
checks  for  payment,  to  indorse  them,  chiefly  as  an 
assurance  that  the  checks  have  been  regularly 
and  properly  obtained. 

A  qualified  indorsement  is  one  which  limits  or 
qualifies  the  liability  of  the  indorser.  Thus  where 
an  indorser  shall  be  unwilling  to  assume  liability 
upon  a  check,  she  may  (provided  the  indorsee  will 
accept  such  an  indorsement)  relieve  herself  of 
liability  by  indorsing  the  check  **Pay  to  the  order 
of  Richard  Roe,  without  recourse,  Mary  J.  Doe," 
or  ''Mary  J.  Doe,  without  recourse."  So  when 
a  doubtful  check  is  to  be  deposited,  in  order  to 
avoid  the  payment  of  possible  protest  fees  the 
indorsement  may  read,  "For  deposit  for  collection, 


Banks — The  Bank-Account        37 

Mary  J.  Doe,"  or,  *'Pay  to  the  order  of  the  Safe 
National  Bank,  New  York  City,  for  collection, 
Mary  J.  Doe." 

Indorsements  may  also  be  restrictive — that  is, 
they  may  be  so  worded  as  to  restrict  the  payment 
of  the  checks  to  some  certain  parties,  as  where 
checks,  intended  to  be  deposited,  are  indorsed, 
"For  deposit,"  "For  deposit  only,"  or,  "For 
account  of ";  in  such  cases  the  banks  in  which  the 
checks  are  deposited  will  be  restricted  to  the 
collection  of  the  checks  from  the  banks  upon 
which  they  are  drawn. 

In  a  strict  sense  an  indorsement  in  the  words 
"Pay  to  Richard  Roe,"  without  the  words  "or 
order"  or  "order  of,"  will  have  the  effect  of 
restricting  the  payment  of  the  check  to  Richard 
Roe  personally,  as  will  be  the  case  if  a  check 
shall  be  drawn  payable  to  "Richard  Roe";  but 
in  practice,  in  view  of  the  fact  that  the  drawer 
of  a  check  will,  as  a  general  rule,  have  no  preference 
between  payment  to  the  payee  and  payment 
to  any  other  person  whom  the  payee  may  desig- 
nate by  his  indorsement,  banks  will  often  consider 
such  indorsements  as  oversights,  and  pay  such 
checks  to  the  orders  of  subsequent  indorsers  as  in 
ordinary  cases.  It  must  be  said,  however,  that 
there  is  seldom  if  ever  any  legitimate  object  to  be 
gained  by  such  experiments  in  the  methods  of 
business,  and  this  statement  is  a  sufficient  reason 
for  their  uniform  avoidance. 


38    The  American  Business  Woman 

An  accommodation  indorsement  is  one  which  is 
made  by  a  person  who  has  no  direct  interest  in 
the  check,  but  who  indorses  it  simply  to  lend  credit 
to  the  check  as  an  accommodation  to  the  draw- 
er. Accommodation  indorsements  (more  common 
on  bills  of  exchange  and  promissory  notes)  are 
sometimes  necessary  for  persons  who  are  actively 
engaged  in  commercial  business,  but  they  have 
often  been  the  causes  of  loss  and  financial  ruin; 
requests  for  such  accommodations,  therefore,  should 
meet  with  prompt  and  positive  refusals  from  those 
for  whose  instruction  this  volume  has  been  written. 

The  first  indorsement  upon  a  check  should  be 
made  by  writing  across  the  back  of  the  check, 
about  one-third  way  down,  and  from  the  top  of 
the  check  toward  the  bottom,  the  words  of  the 
indorsement  and  the  indorser's  name.  An  in- 
dorsement which  is  written  at  the  extreme  end 
of  a  check  may  be  easily  torn  off  by  some  mischiev- 
ous or  dishonest  person,  and  one  which  is  written 
too  far  down  upon  a  check  will  not  allow  suffi- 
cient room  in  the  proper  places  for  subsequent 
indorsements. 

Properly  arranged  indorsements  will  read  from 
the  tops  toward  the  bottoms  of  the  checks  upon 
which  they  are  written.  This  has  become  an 
established  rule,  because  it  is  evidently  necessary 
that  indorsements  shall  follow  each  other  in  regu- 
lar order,  all  reading  in  the  same  direction,  and 
the  general  practice  among  business  men  when 


Banks — The  Bank  Account         39 

reading  indorsements  is  to  turn  checks  in  such  a 
manner  that  indorsements  which  have  been 
written  according  to  the  rule  will  then  appear 
in  the  most  convenient  positions.  Many  in- 
dorsements, especially  those  made  by  persons 
who  are  generally  unacquainted  with  the  methods 
of  business,  are  wrongly  written  and  are  thus 
the  causes  of  considerable  inconvenience  to 
persons  through  whose  hands  they  necessarily 
pass;  there  seems  to  be,  also,  some  difficulty  in 
understanding  this  apparently  simple  matter. 
Let  us  suppose  that  in  Fig.  i  there  is  a  small 
circular  hole  represented  by  the  small  circle  at  the 
top  of  the  check  and  near  the  left-hand  comer. 
The  back  of  the  cheek  with  the  several  indorse- 
ments will  then  appear  as  represented  in  Fig.  5, 
the  small  circle  at  the  left  still  representing  the 
supposed  hole  at  the  top  of  the  check.  A  check 
will  be  in  the  proper  position  for  indorsement 
if  the  following  method  of  turning  shall  be  em- 
ployed: a  person  who  is  about  to  indorse  a  check 
should  take  it  in  her  left  hand,  grasping  it  at  the 
left  end,  and,  holding  it  face  toward  her  and 
right-side  up,  turn  the  top  of  the  check  toward  her, 
at  the  same  time  revolving  the  right  end  toward 
her;  this  movement  will  bring  the  back  of  the 
check  uppermost  with  the  top  on  the  left  hand. 
If,  notwithstanding  the  regular  rule,  the  first 
indorsement  upon  a  check  shall  have  been  written 
wrongly,  all  subsequent  indorsements  must  also 


40    The  American  Business  Woman 

be  written  wrongly;  otherwise  the  general  in- 
convenience caused  by  the  first  error  will  evidently 
only  be  increased  by  efforts  which  are  intended 
to  be  in  the  way  of  correction. 

In  indorsements  the  names  ought  to  correspond 
with  the  names  of  the  indorsers  as  written  and 
spelled  in  the  bodies  of  the  checks  or  in  previous 
indorsements.  Thus,  if  a  check  shall  be  drawn 
(or  indorsed)  payable  to  the  order  of  "M.  J. 
Doe,"  it  should  be  indorsed  "M.  J.  Doe,"  not 
"Mary  J.  Doe"  or  "Mary  Johnson  Doe."  But 
if  checks  are  intended  to  be  deposited  in  banks, 
the  final  indorsements  must  correspond  with  the 
names  and  spelling  of  the  signatures  at  the  banks. 
Hence  if  the  above-described  check  shall  be  in- 
dorsed for  the  purpose  of  depositing  to  the  credit 
of  Mary  J.  Doe  in  the  Safe  National  Bank  of 
New  York  City,  the  indorsements,  properly  writ- 
ten, will  read:  "Pay  to  the  order  of  Mary  J. 
Doe,  M.  J.  Doe,"  and  "For  deposit  only,  Mary 
J.  Doe";  or  "Pay  to  the  order  of  Mary  J.  Doe, 
M.  J.  Doe,"  and  "Pay  to  the  order  of  the  Safe 
National  Bank,  New  York  City,  Mary  J.  Doe." 
Similarly,  if  in  a  check  the  name  of  a  payee  shall 
be  misspelled,  or  incorrectly  written  (unless  the 
variation  shall  be  so  great  as  to  leave  the  real 
payee  in  doubt,  in  which  case  the  check  should  be 
returned  to  the  drawer  for  correction),  the  indorse- 
ment should  include  both  the  incorrect  and  cor- 
rect names.    For  example,  suppose  that  a  check 


Banks — The  Bank-Account         41 

which  is  intended  for  Mary  J.  Doe  shall  be, 
by  mistake,  drawn  payable  to  the  order  of  Mary 
J.  Dow;  the  proper  style  of  indorsement  (sup- 
posing that  the  check  is  to  be  paid  to  Richard 
Roe)  will  be,  "Pay  to  the  order  of  Mary  J.  Doe, 
Mary  J.  Dow " ;  and  "Pay  to  the  order  of  Richard 
Roe,  Mary  J.  Doe."  If  a  check  shall  be  made 
payable  to  the  order  of  "Mary  J.  Doe,  Extrx." 
("Agent"  or  "Trustee"),  the  first  indorsement 
must  include  the  necessary  additional  word ;  and 
,if  a  check  shall  be  drawn  payable  to  the  order  of 
Jane  W.  Doe,  and  the  bank-account  shall  be  kept 
by  Mary  J.  Doe  as  Jane's  attorney  in  fact,  the 
check  (to  be  deposited  in  the  Safe  National  Bank) 
must  be  indorsed,  "Pay  to  the  order  of  the  Safe 
National  Bank,  New  York  City,  Jane  W.  Doe,  by 
Mary  J.  Doe,  Atty.  in  fact"— "Atty.,"  or  "Attor- 
ney in  fact,"  as  the  signature  at  the  bank 
may  be. 

In  case  of  the  loss  or  theft  of  a  bank  check, 
the  holder  who  has  lost  it  should  immediately 
notify  the  bank  upon  which  it  is  drawn,  giving 
a  careful  description  of  the  check,  with  the  number, 
date,  amount,  drawer's  and  indorsers'  names  if 
possible,  and  requesting  the  bank  to  stop  payment 
upon  the  check  and  to  hold  it,  when  presented,  for 
the  rightful  owner.  The  drawer  also  should  be 
notified  of  the  loss  and  should  be  requested  to 
stop  the  payment  of  the  check  at  the  bank.  In 
such  a  case,  if  the  check  has  been  drawn  or  in- 


42    The  American  Business  Woman 

dorsed  in  such  a  manner  that  a  forged  indorsement 
will  be  necessary  before  it  can  be  collected,  the 
notice  to  the  bank  will  probably  be  successful; 
but  if  the  lost  check  has  been  indorsed  in  blank, 
or  drawn  payable  to  the  bearer,  the  loss  may 
fall  (and  very  justly)  upon  the  person  who  has 
carelessly  lost  it  or  suffered  it  to  be  stolen. 

When  the  payment  of  a  check,  at  the  bank 
upon  which  it  is  drawn,  is  refused  (the  check  is 
dishonored)  because  the  balance  of  the  drawer 
is  insufficient,  the  check  will  be  returned  to  the 
person  presenting  it  with  the  letters  "N.  G/* 
(not  good)  written  upon  the  face.  When  payment 
is  refused  because  the  drawer  has  no  account  at  all 
at  the  bank  upon  which  the  check  is  drawn,  the 
returned  and  dishonored  check  will  bear  upon  its 
face  the  words  "No  account." 

A  dishonored  check  is  said  to  be  protested  when 
a  notarial  certificate,  to  the  effect  that  a  notary- 
public  has  presented  the  check  for  payment,  that 
payment  has  been  refused,  and  that  he  therefore 
protests  against  the  drawer  and  indorsers  for  the 
payment  of  the  check  and  costs,  is  attached  to  the 
check.  The  object  of  the  protest  is  to  furnish 
official  evidence  of  the  non-payment ;  it  is  used  (in 
connection  with  checks)  principally  upon  dishon- 
ored checks  when  the  holders  of  the  checks  and 
the  banks  upon  which  they  are  drawn  are  in  dif- 
ferent States,  and  is  usually  accompanied  by 
notices  to  .the  indorsers  that  the  check  has  been 


Banks — The  Bank-Account         43 

protested   and   that  the  holder  looks  to    them 
for  payment. 

The  bank  check,  unlike  other  negotiable  instru- 
ments, is  said  to  die  with  the  drawer,  or,  in  other 
words,  banks  have  no  authority  to  pay  checks 
after  the  deaths  of  the  drawers,  although  the 
debts  for  which  the  checks  were  given  may. 
legally  be  collected  from  the  estates  of  the  de- 
ceased drawers.  The  custom  (which  is  some- 
times made  use  of  between  husbands  and  wives  in 
order  to  provide  the  survivor  with  funds  for 
immediate  expenses,  in  case  of  the  sudden  death 
of  the  one  keeping  the  bank-account)  of  drawing 
checks  which  are  intended  to  be  used  only  in  case 
of  the  deaths  of  the  drawers,  is  therefore  entirely 
improper. 

Making  Deposits. — When  making  a  deposit 
in  a  bank  the  procedure  should  be  as  follows:  (i) 
A  careful  and  expHcit  memorandum  of  the  items 
making  up  the  deposit  should  be  made  in  the 
check-book,  with  the  amounts  of  each  item  and 
the  sum- total  of  the  deposit,  as  will  hereafter  be 
explained  and  illustrated.  (2)  All  the  checks  to  be 
deposited  should  be  properly  indorsed,  the  last 
indorsement  on  each  check  being  "For  deposit 
only,"  with  the  signature  of  the  depositor.  This 
style  of  indorsement  is  undoubtedly  proper;  it 
must,  however,  be  stated  here  that  banks  very 
generally  object  to  the  indorsement  in  question 


44    The  American  Business  Woman 

as  being  restrictive.  When  such  objection  shall 
be  offered,  checks  which  are  intended  to  be 
deposited  should  be  indorsed  in  the  ordinary 
manner  to  the  order  of  the  banks,  thus,  for  ex- 
ample: ''Pay  to  the  order  of  the  Safe  National 
Bank,  New  York  City,  Mary  J.  Doe."  (3)  A 
deposit  ticket  should  be  properly  made  up  by 
writing  upon  it,  in  the  places  which  are  provided 
for  them,  first  the  sum  of  all  coins  or  specie  con- 
tained in  the  deposit,  next  the  simi  of  all  the 
bank-notes  or  bills,  and  lastly  the  amount  of  each 
separate  check,  with  the  sum-total  of  the  deposit, 
as  is  shown  by  the  deposit  ticket  represented  in 
Fig.  6.  (4)  The  deposit  ticket,  checks,  and  bills 
should  be  placed  in  the  bank-book,  at  the  page 
where  the  entry  of  the  deposit  is  to  be  made. 
(5)  All,  together  with  the  specie  of  the  deposit, 
should  then  be  taken  to  the  bank  and  handed 
in  at  the  window  of  the  receiving  teller,  the  coins 
or  specie  being  laid  upon  the  small  shelf  or  plat- 
form at  the  window  at  one  side  of  the  bank- 
book. (6)  The  gross  amount  of  the  deposit  having 
been  entered  by  the  teller  in  the  bank-book, 
and  the  book  having  been  returned  to  the  depositor, 
the  entry  in  the  book  should  be  examined  for  the 
purpose  of  making  sure  that  it  corresponds  with  the 
sum-total  of  the  deposit  in  the  check-book  and 
upon  the  deposit  ticket. 

Check-Books. — Check-books  are,  as  the  name 


Banks — The  Bank-Account 


45 


indicates,  books  containing  blank  checks,  which 
are  issued  by  the  banks  for  the  use  of  their  de- 


ya>i^'^c 


'Ct^^ 


FIG  5 


Deposited  By 

Jiiu^A.S^.... 

IN  THE    SAFE  NATIONAL  BANK 

Spccie 

3Z 

^7 

Bills 

/SZ 

f 

Checks 

^ 

1 
lib 

/Of 

U 

'I 

JL 

^3/ 

FIG   6 


positors.     They  are  printed  with  one,  two,  three, 
or  even  a  greater  number  of  checks  on  each  page 


46    The  American  Business  Woman 

(those  having  three  checks  to  the  page  will  prob- 
ably be  found  most  convenient),  each  check  being 
usually  punctured  along  its  edges  in  order  that 
it  may  be  torn  out  without  difficulty,  the  pages 
being  somewhat  longer  than  the  checks  and  having 
a  stub  or  stump  for  dates,  numbers,  and  memo- 
randa opposite  each  check,  so  that  when  the 
checks  are  torn  out  only  the  stubs  remain.  If 
the  checks  are  not  punctured  along  their  edges, 
a  flat,  sharp  ruler  or  thin  metallic  tearer  may  be 
used  to  tear  the  checks  nicely  from  the  books. 

The  following  pages  represent  the  first  few 
pages  of  a  check-book  with  memoranda  of  de- 
posits and  checks,  the  corresponding  checks  neces- 
sarily having  been  torn  out  and  used,  and  the 
first  of  these  pages  representing  the  fly-leaf  at 
the  beginning  of  the  check-book. 


48    The  American  Business  Woman 


Safe  National  Bank  of  New  York  City. 
First  deposit,  January  2,  1895. 

John  Roe  &  Co.,  rent  of  store  163  Narrow 

St.,  New  York,  for  Jan.,  1895         .        .    $216.66 

Richard  Doe,  six  mos.  int.  on  his  bond  to 

Jan.  I,  1895 500. 

Jane  Williams,  purchase  price  of  house  and 
lot  239  Jones  St.,  N.  Y.  City,  this  day 
sold  to  her — Principal     ....   9,000. 


Jan.  1 8th. 


I9r7i6.66 


Wm.  Johnson,  rent  of  store  165  Narrow 

St.,  N.  Y.  City,  for  Jan.,  1895        .        .  216.66 

$9»933.32 


Banks — The  Bank-Account         49 


No.  I. 


New  York,  Jan.  14,  1895. 

ver  St.,  N 

Rm 

N 

Geo.  W.  Miller  &  Co.  (Sil 

Y. 

City),  5  tons  nut  coal 

@  $4-50, 

and 

10 

tons 

furnace  coal  @  $4.50 

No.  2. 


New  York,  Jan.  14,  1895. 

Dr.  Thomas  Clark  (916  W.  73d  St.,  N.  Y.),  pro- 


fessional services  June  15,  1894,  to  date 


No.  3. 


New  York,  Jan.  16,  1895. 

Henry  T.  Jones,  Treas.  (922  W.  70th  St.,  N.  Y. 

City),  pew  rent  Western  Cong.  Church,  N.  Y. 

City,  six  mos.  to  Jan.  i,  1895 


67 


54 


100 


221 


50: 


50 


50    The  American  Business  Woman 


1895. 

Jan.  19th. 

9 

933 

32 

Thompson  &  Son  (62  April  St., 

Boston),  rent  of  bldgs.  962  & 

932   March  St.,   Boston,  for 

Jan.,    collected   by   them   as 

agents 

195 

83 

Coupons  U.  S.  4%  Bonds,  six 

mos.  int.  to  Jan.  i,  1895 

200 

John     Rider,     price    of     horse 

"Bill "  sold  him  Jan.  i8th     . 

105 

Watson  &  Roe  (18  Wide  St.,  N. 

Y.),  on  acct.  of  rents  of  N.  Y. 

property  for  Jan.,  1895,  col- 

lected by  them  as  agts.  . 

650 

I 

150 

83 

Jan.  27th. 

Watson  &  Roe  (18  Wide  St.,  N. 

Y.),  bal.  of  rents,  N.  Y.  prop- 

erty for  Jan.,  1895,  collected 

by  them  as  agts.,  less  com- 

missions     

Chas.  Tolley  (132  Narrow  St., 

632 

17 

N.  Y.),  ground  rent  of  lots 

132  &  134  Narrow  St.,  N.  Y., 

for  quarter  ending  Dec.  31, 

1894 

I 

200 

I 

832 

17 

12 

916 

32 

Banks — The  Bank- Account         51 


$9,711.82. 

(Certified.) 

No.  4. 

221 
9,000 

100 

no 
9.431 

50 
50 

New  York,  Jan.  20,  1895. 

Edwd.  B.  Wilson  (Brownville,  Conn.),  amt.  loaned 

him,  ist  mtg.,  5  yrs.,  5%,  his  bond,  on  house  and 

lot  842  W.  83d  St.,  N.  Y. 

(Principal.) 
(See  deposit  Jan.  2,  1895.) 

^       No.  5. 

New  York,  Jan.  21,  1895. 
Cash,  for  household  expenses 

'     '     No.  6. 

New  York,  Jan.  21,  1895. 

Hobson  &   Co.    (12   March  St.,   Boston).        Ins. 

prems.  on  bldgs.  926  &  932  June  St.,  Boston, 

each  $5,500,  @  I  %.     Expire  Jan.  20,  1898 

52    The  American  Business  Woman 


1895. 

Feb.  3d. 

Frugality  Savings  Bank,  N.  Y 
Income  saved  last  year,  and 
six  mos.  int.  on  part  to  Jan. 
I,  1895      .... 
(Principal.) 


Feb.  4th. 

Jones  &  Co.  (291  Narrow  St. 
N.  Y.),  Royalties  on  my 
deed,  husband's  book,  "His 
tory  of  New  England,"  Jan 
I,  1894,  to  Jan.  I,  1895 

George  Henderson,  quarter's 
ground-rent  of  lot  977  W. 
38th  St.,  N.  Y.,  to  Feb.  i, 
1895  .... 


275 


250 


12 


14 


916 


32 


002 


04 


525 


443 


36 


Banks — The  Bank-Account 


53 


13,484.82. 

'       No.  7. 

9431 
176 

232 
9,881 

50 
19 

67 

15 
51 

New  York,  Feb.  3,  1895. 

Mary  Brown   (978  E.  35th  St.,  N.  Y.).     Dress- 

maker's bill  for  myself  from  May  i,  1894,  to  date 

No.  8. 

New  York,  Feb.  3,  1895. 

Bilson  &  Co.,  groceries  from  Jan.  i,  1895  to  date 

No.  9. 

New  York,  Feb.  5,  1895. 

Wright  &  Sons  (908  E.  226.  St.,  N.  Y.).     Carpenter 

work  on  houses  in  W.  726.  St.,  N.  Y. — 2  storm 

doors,  cellar  Stairs,  etc. 

54    The  American  Business  Woman 

The  most  conveniently  arranged  check-books 
are  those  having  two  sets  of  Hnes  ruled  on  the 
backs  of  the  stubs  (on  the  pages  which  are  to  be 
used  for  the  memoranda  of  deposits),  as  is  shown 
in  the  preceding  pages,  the  two  columns  nearest 
the  centres  of  the  pages  being  intended  for  the 
dollars  and  cents  of  the  separate  items  making 
up  the  deposits,  and  the  other  two  columns 
for  the  total  amounts  of  the  various  deposits. 
When  a  check-book  contains  only  one  of  these 
sets  of  lines  (that  which  is  intended  for  the  total 
amounts),  the  several  items  of  the  deposits  may 
be  put  down  outside  of  the  ruled  columns  (as 
on  the  fly-leaf  represented  on  page  46,  imagining 
the  totals  $9,716.66  and  $216.66  to  be  in  the  ruled 
columns) ;  otherwise  mistakes,  due  to  the  confusion 
of  figures,  are  likely  to  occur  in  adding  up  the 
columns  of  totals. 

When  a  page  of  checks  shall  be  used  up,  the 
columns  of  checks  and  deposits  should  be  added 
up  and  the  sums  carried  over  to  the  tops  of  the 
respective  next  following  pages;  the  balance  (ob- 
tained by  subtracting  the  sum  of  the  checks  from 
the  sum  of  the  deposits)  should  also  be  put  down 
in  small  figures  at  the  upper  left-hand  corner  of 
each  page  of  checks.  When  adding  up  the  columns 
of  checks  and  deposits,  the  amounts  which  have 
been  carried  over  from  the  preceding  pages,  and 
placed  at  the  tops  of  the  pages  in  question,  must 
of  course  be  included  in  the  additions. 


Banks — The  Bank-Account         55 

The  balances,  which  are  written  in  small 
figures  at  the  top  of  each  page  of  checks,  are  the 
actual  balances  at  the  bank  to  the  credit  of 
the  depositor.  It  is  most  necessary  that  these 
balances  shall  be  correct,  else  the  depositor  may- 
be deceived  and  overdraw  her  account.  The 
following  is  an  excellent  method  of  verifying  the 
balances,  which  will  remove  all  danger  of  mistakes : 
The  balance  is  first  obtained  in  the  regular  manner, 
by  subtracting  the  sum  of  the  checks  from  the 
sum  of  the  deposits,  and  a  memorandum  (not  in 
the  check-book)  is  made  of  its  amount;  it  is 
obtained  a  second  time  by  adding  the  sum  of  the 
deposits  which  have  been  made  since  the  last  pre- 
vious balance,  to  the  last  previous  balance,  and 
from  this  sum  subtracting  the  sum  of  the  checks 
which  have  been  issued  since  the  last  previous 
balance.  Thus,  referring  to  pages  49  and  50,  the 
balance  which  is  first  to  be  obtained  will  be 
$12,916.32  -  $9,431.50=  $3,484.82.  The  sum  of 
the  deposits  which  have  been  made  since  the  last 
previous  balance  and  the  last  previous  balance 
will  be  (pages  49  and  50)  $1,150.83 +  $1,832.17 
+  $9,711.82  =  $12,694.82,  and  the  sum  of  the 
checks  will  be  $9,000  +  $100  +  $110  =  $9,210. 
The  latter  subtracted  from  the  former  will  give 
$12,694.82  -  $9,210  =  $3,484.82,  which  corre- 
sponds with  and  verifies  the  balance  which  has 
been  first  obtained,  which  balance  may  then  be 
entered  in  the  check-book  (at  page  53)  correct. 


56    The  American  Business  Woman 

A  unif onn  and  invariable  rule  should  be  adopted 
that  all  moneys  which  shall  be  received,  from 
whatever  source,  and  also  all  moneys  which  shall 
be  disbursed,  shall  go  through  the  bank  in  the 
regular  manner;  that  is,  that  all  checks  and 
cash  which  shall  be  received  shall  be  deposited 
in  the  bank,  and  that  all  bills  and  expenses  shall 
be  paid  either  with  checks,  which  are  drawn  on 
the  bank,  or  with  cash  which  has  been  drawn 
from  the  bank.  Also  all  items  of  principal  should 
be  distinctly  marked  ** principal"  in  the  check- 
book, as  shown  on  pages  46  and  50. 

All  memoranda  in  check-books  should  be  made 
as  explicit  and  comprehensive  as  possible,  using 
abbreviations  whenever  they  will  be  necessary  for 
the  purpose  of  saving  space,  and  without  danger 
of  misunderstanding.  Addresses,  dates,  rates  of 
interest,  times  of  expiration  of  insurance  policies 
and  mortgages,  and  details  of  transactions  in 
business,  are  all  valuable  data  which  a  properly 
kept  check-book  will  contain. 

All  checks  which  are  received  should  be  at  once 
deposited  —  on  the  day  of  receiving  them  (or 
at  least  on  the  next),  if  at  all  practicable — for, 
if  the  final  payment  of  a  check  shall  be  unreason- 
ably delayed,  and  the  bank  upon  which  it  is  drawn 
shall  fail  in  the  meantime,  the  loss  ordinarily 
will  fall  upon  the  holder,  whose  negligence  will 
have  been  the  principal  cause  of  the  non-payment. 

At  frequent  intervals  (if  the  account  is  very 


Banks — The  Bank-Account         57 

active:  every  month  or  six  weeks,  generally- 
speaking,  when  each  page  of  the  book  is  nearly 
filled,  and  always  when  requested  to  do  so  by  the 
bank)  the  bank-book  must  be  left  with  the  book- 
keepers at  the  bank  to  be  balanced.  This  the 
bookkeepers  do  by  entering,  upon  the  pages 
opposite  to  those  which  are  used  for  the  entry  of 
deposits,  the  amounts  of  all  the  checks  which 
have  been  drawn  by  the  depositor  since  the  last 
balancing  of  the  bank-book  (all  of  which  checks 
have  been,  in  the  meantime,  returned  to  the  bank 
for  final  payment  by  the  various  holders  or  by  their 
banks),  and  by  writing  in  the  book  the  balance, 
which  is  obtained  in  the  usual  manner.  When, 
a  few  days  afterward,  the  depositor  calls  at  the 
bank  for  the  balanced  bank-book,  the  book  (some- 
times also  a  separate  memorandtmi  of  the  items 
of  the  checks  and  deposits)  and  all  the  checks 
which  have  been  issued  by  the  depositor  since  the 
last  balance  (which  checks  are  now  called  vouchers^ 
and  are  stamped  "paid,"  or  otherwise  marked 
by  cutting  crosses  through  them  to  indicate  that 
they  have  performed  their  work  and  are  of  no 
further  value)  are  returned  to  her.  At  the  earliest 
opportunity  the  vouchers  should  be  examined  and 
compared  with  the  stubs  in  the  check-book,  in 
order  to  guard  against  mistake  and  forgery, 
and  the  check-book  should  be  balanced  to 
correspond  with  the  bank-book. 

The  balancing  of   the   check-book  should    be 


58    The  American  Business  Woman 

done  by  adding  up  all  the  deposits  which  are 
included  in  the  balance  of  the  bank-book  (or  all 
the  deposits  which  have  been  made  since  the  last 
balancing  of  the  bank-book),  without  reference 
to  the  private  balances  which  have  been  written 
upon  each  page  of  stubs  in  the  check-book  as  before 
suggested,  and  all  the  amounts  of  the  vouchers 
which  have  been  returned  by  the  bank.  The 
difference  between  these  two  sums  must  correspond 
exactly  with  the  balance  obtained  by  the  book- 
keepers in  the  bank-book,  else  there  must  be  a 
mistake,  or  possibly  a  forgery,  which  must  be  at 
once  inquired  into. 

For  a  practical  illustration  of  the  somewhat 
confusing  process  of  balancing  the  check-book, 
we  may  suppose  pages  60  and  61  to  represent  two 
pages,  respectively,  of  memoranda  of  deposits  and 
stubs  in  a  check-book;  that  the  bank-book  has 
been  (on  October  13,  1896)  left  at  the  bank  to  be 
balanced;  and  that  it  has  been  returned  balanced 
to  October  15th,  the  balance  being  $4,005.45. 

As  soon  as  possible  after  receiving  the  balanced 
bank-book,  the  vouchers  must  be  compared  with 
the  stubs  in  the  check-book,  and  found  to  be 
correct;  that  is,  all  the  checks  which  have  been 
issued  since  the  last  bank  balance  are  present 
without  alteration,  and  there  are  no  fraudulent 
checks.  The  deposits  which  are  included  in  the 
bank-book  balance  (all  subsequent  to  the  last 
bank  balance)  must  then  be  added  up,  and  the 


Banks — The  Bank-Account         59 

sum  found  to  be  $8,633.78,  which  corresponds  with 
the  figures  in  the  bank-book.  Next,  the  sum 
of  the  stubs  corresponding  to  the  vouchers  which 
have  been  returned  is  found  to  be  $4,628.33, 
which  also  corresponds  with  the  figures  in  the 
bank-book,  and  on  the  memorandum  sheet,  if 
there  be  one.  The  subtraction  of  the  latter  sum 
from  the  former  will  give  the  balance  which  is 
contained  in  the  bank-book,  $4,005.45,  and  the 
figures  may  then  be  written  (in  red  ink,  or  with 
lines  drawn  under  them  to  distinguish  them)  in 
the  check-book  in  the  manner  which  is  indicated 
in  the  illustrations. 

The  practical  effect  of  the  bank  balance  is  to 
complete  the  account  up  to  the  date  of  the  balance, 
and  the  account  thereafter  proceeds  in  the  same 
manner  as  if  it  were  an  entirely  new  one,  beginning 
with  a  deposit  which  is  equal  to  the  balance. 
Thus,  in  the  illustrations  of  pages  62  and  63,  after 
the  deposit  of  October  17th  and  the  stub  for 
check  No.  298  has  been  filled  out,  the  private 
balance  to  be  written  at  the  top  of  the  next 
page    of   stubs    will    be    $4,655.45  —  $286.42  = 

$4,369.03. 

It  sometimes  happens  that  one  or  more  of  the 
checks  which  have  been  issued  since  the  last 
balance  (usually  checks  which  have  been  sent  to 
a  distance,  or  the  collecting  of  which  has  been 
carelessly  or  otherwise  delayed  by  the  holders) 
have  not  yet  been  returned  to  the  depositor's 


6o    The  American  Business  Woman 


1896. 

8 

200 

46 

October  loth. 

John  Roe  &  Co.,  rent  of   163 

Narrow  St.,  N.  Y.  City,  for 

Oct.,  1896        .... 

216 

66 

Wm.  Johnson,  rent  of  165  Nar- 
row St.,  N.  Y.  City,  for  Oct., 

1896 

Oct.  15th.   Balance. 

216 

66 

433 

32 

8 

633 

78 

4 

005 

45 

Oct.  17th. 

Watson  &  Roe,  on  acct.  of  rents, 

N.  Y.  City  property,  for  Oct. 

650 

4 

655 

45 

Banks — The  Bank-Account 


6i 


15,139.22. 


New  York,  Oct.  10,  1896. 


No.  296. 


Receiver  of  Taxes.     Taxes  on  995,  997,  999  W 


73d  St.,  N.  Y.  City,  for  1895 


No.  297. 


New  York,  Oct  11,  1896. 

James  Ogden  (84  Narrow  St.,  City),  commission 


for  sale  of  house,  922  W.  98th  St.,  N.  Y.  City, 


I  %  on  $4,500 


Balance 


No.  298. 


New  York,  Oct.  20,  1896. 

Rogers  &  Son  (132  Wide  St.,  N.  Y.  City).     Bill  for 


gas  fixtures  in  building  976  W.  loist  St.,  N.  Y. 
City 


3,061 


24 


1,52209! 


-— - 
4,62833 

4.005  45: 

8.633 '78 1 


286 142 


286  42 


62    The  American  Business  Woman 


'     1896. 

Oct.  loth. 

John  Roe  &  Co.      Rent  of  163 

Narrow  St.,  N.  Y.  City,  for 

Oct.,  1896 
Wm.    Johnson.     Rent    of    165 

Narrow  St.,  N.  Y.  City,  for 

Oct.,  1896 


Oct.  15th.     Balance. 


Oct.  17th. 

Watson  &  Roe,  on  acct.  of  rents, 
N.  Y.  City  property,  for  Oct. 


216    66 


216    66 


46 


433 


633 


527 


32 
78 

54 


650 


177 


54 


Banks — The  Bank-Account        63 


15,139.22. 

No.  296. 

3,061 
1,522 

45 
4,628 
1,522 

3,106 
5,527 

24 
09 

33 
09 

24 
54 

78 
09 

42 
51 

New  York,  Oct.  lo,  1896. 

Receiver  of  Taxes,  for  taxes  on  995,  997  &  999  W. 

73d  St.,  N.  Y.  City,  for  1895 

No.  297. 

New  York,  Oct.  11,  1896.                         , 

James  Ogden  (84  Narrow  St.,  N.  Y.  City).     Com- 

mission for  sale  of  house,  922  W.  98th  St.,  N.  Y. 

City,  I  %  on  $4500 

Less  check  296  not  yet  in 

Balance 

/ 

8.633 

/  Check  No.  296 

1,522 

286 
1,808 

No.  298. 

New  York,  Oct.  20,  1896 

Rogers  &  Son  (132  Wide  St.,  N.  Y.  City).     Bill  for 

gas  fixtures  in  building,  976  W.  loist  St.,  N.  Y. 

1 

64    The  American  Business  Woman 

bank  for  payment,  and  consequently  the  bank 
cannot  return  the  missing  vouchers  to  the  deposi- 
tor with  the  balanced  bank-book.  In  such  a 
case,  the  bank  of  course  has  no  knowledge  of  the 
missing  checks,  and  therefore  can  take  no  account 
of  them  in  the  balance,  which  fact  has  the  effect 
of  making  the  balance  in  the  bank-book  larger 
than  it  should  be  by  the  sum-total  of  the  missing 
checks.  An  examination  of  the  vouchers  will 
show  at  once  what  checks,  if  any,  are  missing, 
and  when  balancing  the  check-book  the  sum  of  the 
missing  checks  must  be  deducted  from  the  sum  of 
the  stubs  (which  is  equivalent  to  adding  it  to  the 
check-book  balance)  in  order  that  the  balances  in 
the  bank-book  and  check-book  may  correspond. 
The  missing  checks  will,  as  a  matter  of  course, 
sooner  or  later  turn  up  at  the  bank  for  payment, 
and  then  will  be  charged  against  the  depositor 
in  the  next  balance.  They  must,  therefore,  be 
entered  again  on  the  check-book  stub  in  the  same 
manner  as  if  new  checks  had  been  drawn.  Thus, 
for  an  illustration,  suppose  that  the  check  No.  296 
(page  63)  has  not  been  returned  with  the  vouchers 
and  balanced  bank-book.  The  balance  in  the 
bank-book  will  then  be  $4,00545  +  $1,522.09  = 
$5,527.54,  and  the  balancing  of  the  check-book, 
in  order  to  correspond,  should  be  done  in  a  manner 
which  is  indicated  on  pages  58  and  59.  The 
private  balance,  to  be  written  at  the  top  of  the 
next  page  of  stubs,  will  be,  in  this  case,  $6,177.54— 


Banks — The  Bank- Account        65 

$1,808.51  =  $4,369.03,  or  precisely  the  same  as  if 
the  check  had  not  been  missing.  If,  instead  of 
one  missing  check,  there  shall  be  several,  the 
manner  of  balancing  the  check-book  will  be  the 
same,  except  that  the  sum- total  of  all  the  missing 
checks  (the  memorandtmi  giving  their  ntimbers) 
must  be  deducted,  and  subsequently  re-entered 
upon  the  stub. 

In  case  of  the  accidental  destruction  or  per- 
manent loss  of  a  check  which  has  been  drawn 
by  the  depositor,  the  fact  must  be  noted  in  the 
check-book,  either  by  erasing  the  amount  of 
the  lost  check  (making  proper  memorandum  upon 
the  stub),  so  that  the  amount  will  have  no  effect 
upon  the  balance,  or  by  deducting  the  amount  of 
the  check  from  the  balance,  and  noting  that  the 
check  has  been  destroyed. 

When  a  check  which  has  been  deposited  has  been 
returned  to  the  depositor's  bank  dishonored 
("N.  G."  or  "No  account**),  the  bank  should 
give  immediate  notice  to  the  depositor  to  make 
the  check  good.  This  may  be  done  by  the 
depositor  going  at  once  to  the  bank,  drawing  her 
own  check  to  the  order  of  the  bank  for  the  amount 
of  the  dishonored  check,  and  exchanging  the 
checks  with  the  bank,  afterward  taking  the  neces- 
sary measures  to  collect  the  amount  from  the 
drawer  or  indorsers  of  the  dishonored  check. 
In  this  manner  the  balance  in  the  check-book 
will  be  made  to  correspond  with  that  at  the  bank, 
5 


66    The  American  Business  Woman 

without  other  calculation  or  memorandum  than 
that  upon  the  stub  of  the  check  which  makes  good 
the  dishonored  one,  since  the  bank  will  not 
charge  the  dishonored  check  against  the  depositor. 
Instead  of  this  method  of  making  dishonored 
checks  good,  banks  often  charge  the  amounts  of 
the  dishonored  checks  against  the  persons  who 
have  deposited  them,  giving  the  depositors  notice 
of  the  facts.  In  such  a  case,  the  balance  at  the 
bank  will  necessarily  be  less  than  the  balance  in 
the  check-book  by  the  sum-total  of  the  dishonored 
checks.  In  order  to  correct  this  discrepancy,  the 
amount  of  the  dishonored  checks  must  be  deducted 
from  the  sum  of  the  deposits  in  the  check-book. 
Suppose  that  the  check  of  John  Roe  &  Co., 
deposited  October  lo,  1896  (page  62),  has  been 
returned  not  good,  and  that  the  amoimt,  $216.66, 
has  been  charged  against  the  depositor  by  the 
bank.  When  the  bank-book  has  been  balanced 
at  the  bank  the  balance  will  be  $4,005.45  — 
$216.66  =  $3,788.79.  The  check-book  must  there- 
fore be  balanced  in  the  following  manner:  from  the 
sum  $8,633.78  deduct  the  amount  $216.66,  with 
the  memorandum  ''less  check  of  John  Roe  &  Co. 
deposited  Oct.  loth,  returned  N.  G.,  and  charged 
against  me.**  This  will  make  the  simi  of  the 
deposits  $8,633.78  —  $216.66  =  $8,417.12,  and  the 
balance  in  the  check-book,  $8,417.12— $4,628.33 
=$3,788.79,  which  corresponds  with  the  balance 
at  the  bank. 


Banks — The  Bank-Account         67 

If  the  bank-book  has  not  been  balanced  at  such 
a  time  as  will  exactly  complete  it  (some  checks 
still  remaining  out,  or  some  of  the  checks  from 
the  new  bank-book  being  included  in  the  balance), 
the  account  in  the  new  check-book  must  be 
commenced  by  carrying  over,  from  the  old  book 
to  the  respective  pages  of  the  new  book,  the  sums 
of  the  stubs  and  deposits,  in  each  case  with  the 
memorandum,  "from  old  check-book." 


CHAPTER  III 

SAVINGS    BANKS 

SAVINGS  banks  are,  properly  speaking,  benevo- 
lent institutions,  organized  for  the  purpose 
of  encouraging  the  saving  and  accumulation  of 
money.  Hence,  in  theory  at  least,  if  perhaps  not 
always  in  practice,  extraordinary  precautions  are 
taken  by  savings  banks  to  guard  against  loss  of 
funds,  and  all  profits,  over  and  above  economical 
and  necessary  expenses,  are  paid  to  the  depositors 
in  the  form  of  interest. 

Security  of  Savings  Banks. — The  law  gen- 
erally undertakes  to  exercise  great  care  in  regulat- 
ing and  directing  the  management  of  savings 
banks.  They  are  organized  under  the  laws  of 
the  States  in  which  they  conduct  business,  and 
all  persons  are  forbidden  to  transact  the  business  of 
savings  banks  without  the  permission  of,  and  the 
strict  compliance  with,  the  statutes.  The  laws 
of  the  various  States,  in  this  respect,  are  not 
entirely  imiform;  but  in  the  more  careful  and 
conservative  of  the  States  the  following  regula- 
tions may  be  considered  to  apply  in  a  general 

manner: 

68 


Savings  Banks  69 

Specified  numbers  of  incorporators  are  required, 
and  their  characters  and  responsibilities  must  be 
satisfactory  to  the  authorities.  The  amount  of 
deposits  which  a  savings  bank  may  receive  from 
a  single  individual  or  corporation  is  limited,  in 
order  that  funds  of  the  bank  may  not  become  too 
large  for  advantageous  investment.  Speculation 
with  the  funds  is  strictly  forbidden.  Loans  upon 
personal  security,  dealing  in  promissory  notes,  bills 
of  exchange,  and  general  merchandise  are  not 
allowed.  Investment  of  the  funds  is  restricted 
to  United  States  bonds,  the  bonds  of  certain 
States,  cities,  counties,  and  villages,  and  mortgages 
upon  real  estate  (usually  not  to  exceed  a  certain 
proportion  of  the  actual  value  of  the  real  estate). 
They  may  own  such  real  estate  as  is  necessary 
for  business  purposes,  or  as  may  be  obtained  by 
necessary  foreclosure,  collection  of  judgments,  etc. 
Regular  and  sworn  reports,  giving  all  necessary 
information  concerning  the  conditions  of  savings 
banks,  are  required  to  be  made  to  the  State  au- 
thorities. Certain  acts  on  the  part  of  the  directors 
and  officers  which  are  considered  to  be  dangerous 
to  the  depositors  are  made  punishable  as  crimes. 

Savings  banks  which  have  been  long  established 
in  conservative  States  are  very  generally  con- 
sidered to  be  as  safe  and  reliable  as  any  class  of 
moneyed  institutions.  And  the  statistics  with 
regard  to  savings  banks  appear  certainly  to 
sustain  this  general  confidence. 


70    The  American  Business  Woman 

Selection  of  a  Savings  Bank. — The  selection 
of  a  savings  bank  is  a  matter  of  great  importance 
to  those  who  may  find  it  necessary  to  deposit  their 
money  in  such  an  institution.  Although  the  laws 
of  most  of  the  States  may  honestly  undertake 
to  render  savings  banks  safe  against  failure,  in 
many  cases  the  laws  will  be  found  to  fall  short 
of  a  full  realization  of  their  good  intentions. 
Savings  banks  have  failed,  and  will  fail,  in  spite 
of  watchful  legislatures  and  wise  and  severe 
judges.  Therefore  it  will  not  be  sufficient  to 
depend  alone  upon  the  restraining  and  exacting 
requirements  of  the  law  in  this  respect. 

In  the  first  place,  only  regular  savings  banks 
in  the  most  conservative  accessible  States  should 
be  considered,  avoiding  all  co-operative  and 
mutual  benefit  companies,  which  profess  to  act 
as  improved  substitutes  for  savings  banks,  and 
avoiding  also,  when  possible,  all  States  the  laws  of 
which  allow  savings  banks  to  invest  their  funds  in 
personal  securities,  and  other  unsafe  speculations. 
In  the  second  place,  old,  well-known  savings 
banks,  doing  business  in  large  cities,  should  invari- 
ably be  preferred.  Finally,  savings  banks  which 
fulfil  the  foregoing  requirements,  which  are 
managed  by  officers  of  well-known  integrity  and 
sagacity,  and  which  have  passed  through  num- 
erous panics  and  business  crises  without  diffi- 
culty, approach  nearest  of  all  to  that  ideal 
of  perfect    security  which   is   contemplated   by, 


Savings  Banks  71 

and  is  in  just  accordance  with,  their  beneficial 
purposes. 

The  usual  routine  of  opening  an  account  at  a 
savings  bank  may  be  described  as  follows: 

The  proposed  depositor  presents  herself  (in- 
troducing herself,  or,  if  accompanied  by  a  friend 
who  is  acquainted  at  the  savings  bank,  a  brief  in- 
troduction by  the  friend  is  desirable)  with  the 
statement  that  she  wishes  to  open  an  occount  by 
depositing  so  much  money,  the  amount  being 
mentioned  lest  there  should  be  objection  to  it. 
She  then,  at  the  request  of  the  clerk,  writes  her 
signature  in  a  book  which  is  kept  by  the  savings 
bank  for  that  purpose;  gives  accurately  such 
further  information  with  regard  to  age,  parents' 
names,  name  of  husband,  children,  etc.,  as  may 
be  required  by  the  savings  bank  for  use  in  case  of 
the  death  of  the  depositor;  and  hands  to  the 
clerk  the  money  which  she  wishes  to  deposit. 
In  her  turn  (announced  by  the  calling  of  her 
name)  she  receives  from  the  teller  a  pass-book 
in  which  the  amount  of  the  deposit  has  been 
properly  entered  to  her  credit,  and  this  completes 
the  business  of  opening  the  account. 


Pass-Books. — ^The  pass-books  furnished  by 
savings  banks  are  the  only  records  and  evidences 
of  their  accounts  which  are  in  the  possession  of 
the    depositors,    and    must    be    presented    when 


72    The  American  Business  Woman 

drawing  or  depositing  money,  or  when  having  the 
amounts  of  interest  calculated  and  entered. 

In  form,  a  pass-book  is  a  simple  account-book 
(the  savings  bank  in  account  with  the  depositor), 
the  left-hand  pages  being  used  for  the  entry  of 
deposits  and  sums  of  interest,  and  the  right-hand 
pages  for  the  entry  of  amounts  drawn. 

The  mere  possession  of  a  pass-book  is,  under 
ordinary  circumstances,  considered  to  be  prima 
facie  evidence  of  ownership,  and  savings  banks,  in 
general,  will  be  warranted  in  paying  the  money 
of  their  depositors  to  any  persons  who  shall 
present  the  pass-books.  Proper  care  should  be 
taken,  therefore,  to  guard  against  the  loss  of  pass- 
books. Depositors  should  make  careful  notes  of 
the  numbers  and  other  designations  of  their 
pass-books,  and  also  of  the  post-office  addresses 
of  their  savings  banks,  in  order  that,  in  case  of  the 
loss  of  their  pass-books,  immediate  notices  may 
be  sent  to  the  savings  banks,  with  instructions 
to  hold  the  books  if  presented,  and  losses  may 
thus  be  prevented. 

In  many  of  the  savings  banks,  the  duties  of 
receiving-teller  and  paying-teller  are  performed 
by  the  same  person,  assisted,  if  necessary,  by 
clerks.  To  the  teller,  or  to  one  of  his  assistants, 
the  pass-book  must  be  presented  when  making 
deposits  and  when  drawing  money. 

Deposits  in  savings  banks  are  made  in  the  fol- 
lowing simple  manner:  The  depositor  hands  the 


Savings  Banks  73 

money  to  be  deposited  and  the  pass-book  to  the 
teller,  or  to  his  assistant,  stating  that  she  wishes 
to  deposit  so  much  money  (giving  the  exact 
amount),  and  takes  her  seat  to  await  the  entry  of 
the  deposit  in,  and  the  return  of,  the  pass-book. 
When  the  pass-book  is  ready  for  delivery  to  the 
depositor,  her  name  is  called  and  she  receives 
from  the  teller  her  pass-book,  with  the  amount  of 
the  deposit  properly  entered,  she  usually  being 
asked  by  the  teller  to  repeat  the  amount  of  the 
deposit,  in  order  to  guard  against  mistake. 

As  a  general  rule,  only  money  (actual  coins  and 
bills)  will  be  received  by  the  savings  banks,  since 
their  business  with  their  depositors  is  not  to  be 
supposed  to  include  the  collection  of  checks,  cou- 
pons, drafts,  etc. ;  but  in  some  cases  savings  banks 
make  exceptions  to  this  rule,  and  receive  checks 
on  deposit,  as  accommodations  to  their  depositors. 
It  is  advisable,  however,  even  in  cases  of  the  latter 
kind,  to  facilitate  the  business  of  the  savings  banks 
by  depositing  only  money,  and  that  in  as  few  bills 
and  coins  as  can  be  done  conveniently.  Drawing 
money  from  the  savings  bank  is  an  almost  equally 
simple  process.  The  pass-book  is  presented  with 
a  statement  of  the  amount  of  money  which  the 
depositor  wishes  to  draw;  a  receipt,  on  the  printed 
form,  which  is  furnished  by  the  savings  bank,  is 
signed  by  the  depositor;  and,  when  the  entry  has 
been  made,  and  the  money  counted  out,  the 
depositor  receives  her  pass-book  and  the  amount 


74    The  American  Business  Woman 

of  money  from  the  teller  in  the  same  manner  in 
which  she  receives  her  pass-book  when  making 
deposits. 

As  a  matter  of  course,  pass-books  should  be 
examined  immediately  upon  leaving  the  tellers' 
windows,  in  order  to  make  sure  that  the  entries 
of  deposits  or  of  amounts  which  have  been  drawn 
have  been  correctly  made. 

Interest. — The  general  principles  upon  which 
the  rates  of  interest  paid  by  savings  banks  are 
determined  are  as  follows:  At  certain  regular 
periods  of  the  year  (semi-annually,  on  the  first 
days  of  January  and  July,  for  example),  the 
directors  and  officers  ascertain,  by  a  careful  bal- 
ancing of  all  the  accounts,  the  receipts  from  various 
investments  of  the  savings  bank  since  the  last 
interest-day,  and  the  expenses  of  the  management 
for  the  same  period ;  and  from  these  the  net  profit 
of  the  business  for  the  period  is  determined.  This 
profit,  divided  pro  rata  among  the  depositors, 
fixes  the  rate  of  interest  for  the  period  in  question. 

The  work  of  balancing  the  accounts  of  a  savings 
bank  necessarily  requires  a  considerable  time, 
and  therefore  interest  cannot  be  collected  by  the 
depositors  until  some  time  after  the  regular  interest 
days.  Allowing  one  month  for  the  work  of  bal- 
ancing, and  assuming  that  the  regular  interest- 
days  are  January  ist  and  July  ist,  pass-books 
should  be  taken  to  the  savings  banks  to  be  bal- 


Savings  Banks  75 

anced,  and  to  have  the  amounts  of  interest  entered, 
during  the  first  days  of  February  and  the  first 
days  of  August  of  each  year.  If  there  are  frequent 
entries  of  deposits  and  of  money  drawn,  that  is, 
if  the  accotmts  are  very  active  ones,  the  pass-books 
should  be  more  frequently  balanced,  on  or  about 
May  1st  and  November  ist,  in  addition  to  the 
regular  tirnes  which  have  been  mentioned,  for 
instance. 

For  the  purpose  of  quickly  verifying  the  balance 
in  the  pass-book,  and  also  for  the  purpose  of 
having  satisfactory  data  of  the  account  at  the 
savings  bank,  in  case  of  any  misunderstanding 
while  the  pass-book  is  in  the  hands  of  the  book- 
keepers (albeit  very  improbable),  the  items  which 
are  necessary  for  the  calculation  of  interest  and  of 
the  balance  may  be  copied  from  the  pass-book,  and 
the  balance  computed  by  the  depositor  in  her  note- 
book before  taking  the  pass-book  to  the  sayings  bank 
to  be  balanced  or  for  the  entry  of  interest.  Upon 
receiving  from  the  savings  bank  the  pass-book, 
with  the  interest  entered  and  the  balance  recorded, 
the  depositor  may,  then,  quickly  compare  the 
figures  with  those  which  are  contained  in  her 
note-book,  and  may  call  attention  to  any  dis- 
crepancy before  leaving  the  savings  bank.  If  this 
suggestion  shall  not  have  been  acted  upon  before 
the  balancing  of  the  pass-book,  the  computations 
of  interest  and  balance  ought,  at  least,  to  be 
verified  by  the  depositor  in  the  usual  manner, 


76    The  American  Business  Woman 

at  the  earliest  opportunity,  and  the  savings  bank 
must  be  notified  at  once  of  any  mistake. 

A  general  rule  among  savings  banks,  with 
regard  to  the  payment  of  interest  upon  deposits, 
is  that  interest  will  not  be  paid  upon  all  deposits 
for  the  exact  times  during  which  they  have  been 
in  the  hands  of  the  banks,  but  only  upon  such 
Slims  as  shall  have  been  on  deposit  during  an 
entire  period  of  time  between  the  last  two  regular 
interest-days.  Thus,  if  a  certain  amount  shall 
be  deposited  in  a  savings  bank  on  the  ist  day  of 
January  (the  regular  interest-days  being  January 
1st  and  July  ist),  six  months'  interest  on  the 
amount  will  be  due  on  the  first  day  of  the  following 
July;  but,  if  the  deposit  shall  be  made  on  the  ist 
day  of  February,  interest  will  not  begin  to  accrue 
imtil  the  next  interest-day  (July  ist  following), 
and  the  depositor  will,  therefore,  sustain  a  loss  of 
interest  for  a  period  of  five  months.  It  is  obvious 
from  this  fact,  that,  whenever  a  choice  of  times 
shall  be  possible,  deposits  in  savings  banks  should 
be  made  during  the  few  days  prior  to  the  regular 
interest-days.  For  the  same  reason,  when  it  shall 
be  necessary  to  draw  money,  if  by  waiting  a  short 
time  the  money  will  remain  in  the  savings  bank 
over  an  interest-day,  the  drawing  should  be 
delayed,  if  possible,  until  after  the  interest-day; 
otherwise  six  months'  interest  on  the  amount  which 
shall  be  drawn  will  be  lost.  In  some  cases,  savings 
banks  allow  margins  of  a  few  days  in  this  respect, 


Savings  Banks  77 

in  the  case  of  deposits,  and  announce  the  fact  by 
properly  placed  notices,  but  such  cases  are  to  be 
regarded  as  exceptional,  and  cannot  be  regularly 
calculated  upon. 

In  conformity  with  the  general  rule,  when 
calculating  the  amount  of  interest  which  is  due 
upon  a  certain  deposit,  the  exact  amount  which  has 
remained  in  the  savings  bank  during  the  entire 
period  of  time  between  the  interest-days  must  be 
obtained  from  the  figures  and  the  dates  in  the 
pass-book,  and  the  interest,  at  the  ascertained 
rate,  must  be  computed  upon  this  amount.  All 
considerations  with  regard  to  the  advisability 
of  making  deposits  in  savings  banks  must  take 
into  account  this  method  of  paying  interest;  else 
depositors  may  be  grievously  disappointed  when, 
upon  going  to  the  savings  banks  for  their  antici- 
pated amounts  of  interest,  they  may  learn  that 
very  little  or  perhaps  no  interest  at  all  is  due. 

Long-continued,  steady  accoimts,  which  remain 
year  after  year  in  the  savings  banks,  without  being 
disturbed  by  the  frequent  drawing  of  money,  will 
receive,  evidently,  the  benefit  of  the  interest  to 
the  greatest  possible  extent.  Indeed,  it  is  for  the 
purpose  of  encouraging  just  such  accounts,  and 
of  discouraging  active  or  variable  accoimts,  that 
the  peculiar  method  of  paying  interest  which  is 
common  among  savings  banks  has  been  adopted. 

Runs  on  Savings  Banks. — At  certain  times 


78    The  American  Business  Woman 

of  sudden  financial  panic  and  excitement,  large 
numbers  of  depositors  in  savings  banks  become 
alarmed,  and,  seriously  apprehending  the  failure 
of  their  savings  banks,  hasten,  without  due  con- 
sideration, to  withdraw  their  accounts  entirely, 
sometimes  only  to  place  the  accounts  in  much  more 
dangerous  positions.  Such  a  rush  of  frightened 
depositors  constitutes  what  is  called  a  "run" 
upon  the  savings  banks.  If  a  particular  savings 
bank  shall  be  in  a  properly  sound  condition,  and 
able  to  pay  in  full  all  the  depositors  who  may 
demand  their  money,  a  run  upon  the  savings 
bank  will,  for  reasons  which  have  been  already 
explained,  result  in  an  enormous  loss  of  interest 
to  the  depositors.  If,  on  the  other  hand,  the 
savings  bank  shall  be  unable,  upon  so  short  a 
notice,  to  pay  all  of  the  amounts  which  may  be 
demanded  by  the  panic-stricken  depositors,  the 
run  will  cause  the  savings  bank,  temporarily  at 
least,  to  suspend  payments. 

An  occurrence  of  this  kind,  while  iinfortunately 
it  cannot  fail  to  increase  the  alarm  of  the  deposi- 
tors, a  large  proportion  of  whom  may  be  ignorant 
people,  unable  to  comprehend  the  real  situation, 
by  no  means  necessarily  indicates  that  the  savings 
bank  is  insolvent,  or  that  any  one  of  the  depositors 
will  lose  anything  by  the  suspension.  The  con- 
dition of  the  savings  bank  may  be  perfectly  sound, 
the  business  may  be  prosperous  in  every  way,  and 
the  funds  may  be  invested  with  perfect  security, 


Savings  Banks  79 

and  with  excellent  discretion,  and  yet,  under  the 
press  of  circumstances,  it  may  be  impossible  for 
the  savings  bank  to  obtain  money  quickly  enough 
to  supply  the  importimate  demands  of  the  crowd 
of  depositors. 

Savings  banks  very  generally  provide,  for  their 
own  protection,  by-laws  to  the  effect  that  no 
amounts  of  money  shall,  at  any  time,  be  drawn 
by  any  depositor  imless  a  prior  notice  of  thirty, 
sixty,  or  ninety  days  shall  have  been  given  of  the 
intention  to  draw  money.  Similar  rules  will  be 
found  printed  in  the  pass-books  of  many  of  the 
savings  banks.  But  the  stated  rule  is  to  be 
regarded  as  entirely  precautious,  and  has  not  been 
enforced  by  the  savings  banks  except  imder  the 
occasional  emergencies  of  panics  and  extensive 
runs. 

It  is  difficult  to  determine  upon  the  course  which 
should  be  pursued  by  prudent  and  thoughtful 
persons  concerning  their  accounts  in  savings  banks 
in  cases  of  great  financial  excitement  and  panic, 
when  moneyed  institutions  are  failing  in  quick 
succession,  and  when  the  common  thought  and 
desire  of  the  majority  is  to  withdraw  accounts 
from  the  savings  banks  at  the  earliest  possible 
opportunities.  Upon  such  occasions  it  will  be 
necessary  to  decide  quickly;  nevertheless  it  will 
be  necessary  to  put  absolutely  to  one  side  the 
action  of  the  majority,  and  thus  guard  effectually 
against  the  dangerous  contagion  of  excitement. 


8o    The  American  Business  Woman 

It  may  be  stated,  as  a  general  rule,  that  the 
headlong,  rushing  crowd  goes  wrong — does  pre- 
cisely what  it  should  not  do — and  the  part  of 
wisdom  will  always  be  the  using  of  one's  own 
judgment  rather  than  of  the  thoughtless  deter- 
mination of  a  mob.  Prompt,  but  not  headstrong 
consideration,  must  be  had  of  all  the  facts  and 
circumstances  which  shall  be  obtainable,  and 
final  conclusions  must  be  followed  to  the  letter. 
The  element  of  uncertainty  will  always  be  present, 
from  the  fact  that  the  individual  depositors  have 
no  adequate  means  of  ascertaining  the  exact 
financial  conditions  of  their  savings  banks.  In 
this  respect  the  probabilities  are  only  to  be  esti- 
mated from  the  general  appearances  and  reputa- 
tions of  the  savings  banks,  from  their  experiences 
and  conduct  upon  former  similar  occasions,  and 
from  the  business  characters  of  the  officers  and 
managers.  Perhaps  the  most  natural  answer  to 
queries  as  to  what  shall  be  done  with  accoimts  in 
savings  banks  in  emergencies  such  as  are  under 
consideration,  will  be  that  depositors  will  adopt 
the  safe  method  with  regard  to  their  principals, 
though  they  may  sacrifice  parts  of  their  incomes, 
if  they  shall  promptly  withdraw  their  deposits 
from  the  savings  banks,  upon  all  such  dangerous 
occasions.  But  this,  evidently,  is  the  conclusion 
of  the  multitudes  which  crowd  the  savings  banks 
at  the  first  rumors  of  danger,  and,  imless  it  may 
be  assumed  that  wise  and  far-seeing  persons  will 


Savings  Banks  8i 

be  able  to  read  the  omens  of  danger  in  advance, 
and  thus  forestall  the  difficulty,  the  adoption  by 
them  of  the  conclusion  which  has  been  mentioned 
will  serve  but  to  place  them  in  the  ranks  of  the 
multitudes.  There  are  other  considerations  in 
the  premises  which  may  not  well  be  neglected. 
Savings  banks  appear  to  be  the  especially  pro- 
tected children  of  the  law.  If,  then,  such  insti- 
tutions are  deemed  to  be  tmsafe,  what  other 
institutions  for  the  depositing  of  money  can  be 
considered  less  so?  Inasmuch  as  there  seems  to 
be  no  satisfactory  answer  to  this  query  which  will 
serve  the  general  purpose,  the  choice  must  lie 
between  different  institutions  of  the  same  kind, 
that  is,  between  savings  banks.  But,  upon  the 
presumption  that  by  the  application  of  the  sugges- 
tions which  have  been  made,  the  best  accessible 
savings  banks  shall  have  been  in  every  case 
selected,  the  choice  will  disappear  altogether,  and 
a  quandary  will  remain  as  the  result  of  an  attempt 
to  apply  the  principles  of  logic  to  the  practice  of 
financiering.  In  short,  there  is  obviously  no 
general  rule  which  can  be  laid  down  for  the 
guidance  of  depositors  in  savings  banks  under 
the  circumstances  which  are  tmder  consideration. 
The  obtaining  of  the  best  results  will  always  re- 
quire the  employment  of  sound  individual  judg- 
ment and  business  sagacity.  But  the  rule  which 
appears  to  come  nearest  to  the  desirable  general 
rule,  and   which,  as  far  as  can  be  ascertained, 


82    The  American  Business  Woman 

seems  to  be  best  sustained  by  the  practical  results, 
may  be  stated  as  follows:  If  the  reputations  of 
the  particular  savings  banks  shall  be  excellent, 
the  selections  having  been  made  according  to  the 
directions  which  are  contained  in  this  chapter, 
and  if  depositors  shall  be  able  to  observe  no  direct 
indications  of  weakness,  their  accoimts  should 
not  be  disturbed. 


CHAPTER  IV 

TRUST  COMPANIES  AND  SAFE  DEPOSIT  COMPANIES 

THE  term  Trust  Companies,  as  used  in  the 
banking  law,  has  been  officially  defined  by 
the  Legislature  of  the  State  of  New  York  as  "any 
domestic  corporation  formed  for  the  purpose  of 
taking,  accepting,  and  executing  such  trusts  as 
may  be  lawfully  committed  to  it,  and  acting  as 
trustee  in  the  cases  prescribed  by  law,  and  re- 
ceiving deposits  of  moneys  and  other  personal 
property,  and  issuing  its  obligations  therefor,  and 
of  loaning  money  on  real  or  personal  securities." 
The  powers  conferred  upon  trust  companies  are 
generally  broad  and  extensive.  They  may  act 
as  fiscal  or  transfer  agents  for  municipalities  or 
corporations ;  receive  trust  moneys  and  other  per- 
sonal property  on  deposit ;  act  as  receivers,  trustees, 
executors,  administrators,  and  guardians;  and 
accept  and  execute  almost  any  form  of  trust, 
power,  or  assignment.  They  may  lease  or  pur- 
chase real  property;  loan  money  on  real  or  per- 
sonal property;  deal  in  stocks,  bonds,  bills  of 
exchange,  etc.;  and  exercise  the  powers  conferred 

upon  banks  generally. 

83 


84    The  American  Business  Woman 

Trust  companies  are  generally  under  the  super- 
vision of  the  State  and  the  law  iindertakes  to 
render  them  safe  by  requiring  certain  formalities 
in  their  formation  and  incorporation ;  by  requiring 
certain  amotmts  of  capital  to  be  paid  up;  by 
restricting  the  investment  of  capital  and  funds; 
and  by  requiring  reports  to  be  filed  at  stated  times 
with  the  banking  (or  similar)  department  of  the 
State. 

Selection  of  a  Trust  Company. — The  selec- 
tion of  a  trust  company  should  be  governed  by 
the  considerations  which  have  been  given  for  the 
selection  of  banks  and  savings  banks;  the  wisdom 
of  the  rule  to  choose  large  companies  in  the  larg- 
est available  cities  will  appear  very  plainly  from 
the  statutory  regulations  concerning  capitals  and 
securities  to  be  deposited  with  the  superintendent 
of  banks.  In  addition  to  these  precautions, 
there  is  another  consideration  which  it  will 
be  well  not  to  overlook  when  selecting  trust 
companies  to  be  used  as  depositaries  for  funds 
awaiting  investment,  and  for  other  purposes  of  a 
fiduciary  nature.  As  has  been  remarked,  trust 
companies  are  authorized  to  conduct  banking 
businesses,  and  in  this  connection  to  discoimt  notes 
and  other  evidences  of  debt,  which  practice  is 
considered  by  careful  and  conservative  persons  to 
be  more  venturesome  and  speciilative  than  is 
consistent  with  the  nature  of    the  institutions. 


Trust  and  Safe  Deposit  Companies    85 

There  are  certain  highly  reputable  trust  companies 
which,  agreeing  with  the  conservative  views  which 
have  been  expressed  in  this  work,  conduct  no 
regular  banking  businesses,  but  confine  themselves 
to  the  special  kinds  of  business  for  which  they 
were,  properly  speaking,  organized,  and  in  which 
their  peciiliar  field  of  usefulness  exists.  In  such 
institutions,  the  element  of  danger  may  be  con- 
sidered as  reduced  almost  to  a  minimum,  and, 
other  things  being  equal,  they  should  be  preferred 
to  trust  companies  which  undertake  to  combine 
the  regular  business  of  trust  companies  with  that 
of  the  banks. 

Making  Deposits. — ^The  selection  of  a  trust 
company  having  been  judiciously  accomplished, 
the  general  procedure  between  the  depositor 
and  the  institution  will  be  as  follows:  Upon 
introduction  to  one  of  the  clerks,  or  introducing 
herself,  the  proposed  depositor  states  briefly  her 
business  (for  example,  that  she  wishes  to  deposit 
ten  thousand  dollars),  and  hands  the  check 
(not  necessarily  certified)  or  money  to  the  clerk 
who  is  in  attendance  upon  her.  If  the  deposit 
consists  of  checks,  bills,  and  specie,  the  depositor 
may  fill  out  a  deposit  ticket  similar  to  those  used 
in  banks,  and  if  she  wishes  to  deposit  coupons, 
they  should  be  placed  in  one  of  the  small  envelopes 
which  are  provided  for  this  purpose,  the  envelope 
having   a   memorandum   upon   its   back   of   the 


86    The  American  Business  Woman 

number,  amounts,  and  total  of  the  coupons.  It 
may  be  stated,  however,  that  such  mixed  deposits 
will  with  better  propriety  be  made  at  the  bank, 
and  the  depositor's  single  check  may  then  be 
presented  for  deposit  at  the  trust  company.  The 
depositor  then  writes  her  signature  in  the  com- 
pany's book,  and  receives  a  certificate  of  deposit 
to  the  effect  that  the  trust  company  has  received 
from  her  the  amount  of  the  deposit,  upon  which 
interest  at  a  certain  specified  rate  will  be  paid, 
and  that  the  company  will  repay  the  sum  of  the 
deposit  to  the  depositor  or  her  assigns  upon  notice 
(usually  five  or  ten  days),  reserving  the  right  to 
reduce  or  discontinue  the  interest,  or  to  pay  off 
the  principal  on  notice  to  the  depositor  by  mail  or 
otherwise.  The  provision  requiring  several  days' 
notice  before  paying  depositors  is  a  precautious 
measure,  the  purpose  of  which  is  to  prevent  a 
sudden  run  on  the  institution,  and,  as  has  been 
explained  in  the  chapter  on  savings  banks,  is 
never  enforced  under  ordinary  circumstances. 
On  the  back  of  the  certificate  of  deposit  is  printed 
a  form  of  receipt  with  columns  for  the  various 
amoimts  of  principal  and  interest  which  may  be 
drawn  by  the  depositor  from  time  to  time.  The 
certificate  of  deposit  answers,  in  general,  the  pur- 
poses of  the  pass-book  of  the  savings  bank.  It 
is  the  depositor's  evidence  of  the  deposit,  and, 
although  trust  companies  are  very  cautious  with 
regard  to   the  payment  of  money,   it  must  be 


Trust  and  Safe  Deposit  Companies    87 

carefully  secured  against  loss  or  theft,  the  number, 
date,  etc.,  being  recorded  in  the  depositor's  note- 
book or  check-book,  in  order  that  immediate  notice 
may  be  given  the  trust  company  in  case  of  loss. 

Drawing  Money. — When  drawing  money  from 
the  trust  company,  the  depositor  presents  her 
certificate  to  the  clerk  with  the  statement  that 
she  wishes  to  draw  so  much  money.  If  only  a 
part  of  the  amount  on  deposit  shall  be  drawn  by 
the  depositor,  she  signs  a  receipt  for  the  amount 
on  the  back  of  the  certificate  and  also  in  the 
company's  book,  and  receives  again  her  certificate 
and  the  company's  check  for  the  amount  drawn. 
When  the  entire  amount  on  deposit  and  interest 
shall  be  drawn,  the  receipts  are  signed  by  the 
depositor  and  the  certificate  surrendered  to  the 
trust  company.  The  checks  which  are  given  by 
trust  companies  to  their  depositors  for  money 
which  has  been  drawn  are  the  companies'  own 
checks  drawn  upon  banks  in  which  the  companies 
keep  their  accounts.  Such  checks  will  generally 
pass  for  certified  checks,  for  the  reason  that  the 
trust  companies  are  presumed  to  be  at  least  as 
sound  and  responsible  as  the  banks  upon  which 
their  checks  are  drawn.  But  if,  for  special  rea- 
sons, a  trust  company's  check  is  required  to  be 
certified,  the  check  must,  as  in  ordinary  cases,  be 
taken  to  the  bank  where  it  is  payable  for  the 
certification.     For  each  deposit  a  separate  certifi- 


88    The  American  Business  Woman 

cate  is  ordinarily  given  by  the  trust  company. 
It  will  facilitate  matters,  therefore,  and  at  the 
same  time  will  limit  the  number  of  certificates 
which  are  to  be  taken  care  of,  if  the  depositor, 
instead  of  making  several  small  deposits,  shall 
make  fewer  deposits  of  larger  amounts;  but,  for 
this  purpose,  delays  which  will  involve  consider- 
able losses  of  interest  are,  as  a  matter  of  course, 
not  advisable. 

Interest. — ^The  rates  of  interest  which  are 
paid  by  the  trust  companies,  although  varying 
somewhat  at  different  times,  are  usually  much 
lower  than  the  rates  which  are  obtainable  from 
regular  investments,  and  even  considerably  lower 
than  the  rates  which  are  paid  by  savings  banks. 
Probably  from  two  to  two  and  one  half  per  cent, 
is  not  far  from  the  average.  But  the  interest 
which  is  paid  by  trust  companies  accrues  for  the 
whole  periods  of  time  during  which  the  deposits 
are  in  the  hands  of  the  companies,  and  this  fact 
must  be  taken  into  account  if  one  chooses  to 
compare  the  direct  benefits  in  the  form  of  interest 
paid  respectively  by  savings  banks  and  trust 
companies.  By  way  of  illustration,  we  may 
suppose  that  the  sum  of  three  thousand  dollars 
is  to  be  deposited  on  the  ist  day  of  March,  to  be 
drawn  for  a  specific  purpose  on  the  ist  day  of 
March  following,  that  is,  the  money  is  to  remain 
on  deposit  for  just  one  year.     If,  now,  this  sum 


Trust  and  Safe  Deposit  Companies    89 

shall  be  placed  in  a  trust  company  at  two  and 
one  half  per  cent,  interest,  a  full  year's  interest, 
or  the  sum  of  seventy-five  dollars,  will  be  received; 
while  if  a  savings  bank  shall  be  the  depository, 
at  the  rate  of  four  per  cent,  interest,  only  six 
months'  interest,  from  July  ist  to  January  ist, 
or  sixty  dollars,  will  be  obtained.  If,  on  the 
other  hand,  the  deposit  is  to  be  made  on  or  shortly 
before  an  interest  day  at  the  savings  bank,  and 
to  remain  a  full  year,  the  depositor  will  receive 
a  full  year's  interest  at  the  rate  of  four  per  cent., 
or  the  simi  of  one  hundred  and  twenty  dollars,  by 
making  use  of  the  savings  bank. 

Safe.  Deposit  Companies. — The  term  ''safe 
deposit  company"  has  been  defined  by  the  bank- 
ing law  of  the  State  of  New  York  in  the 
following  words: 

"The  term  safe  deposit  company,  where  used 
in  this  chapter,  means  every  domestic  corporation 
formed  for  the  purpose  of  taking  and  receiving 
upon  deposit  as  bailee  for  safe-keeping  and  stor- 
age, jewelry,  plate,  money,  specie,  bullion,  stocks, 
bonds,  securities,  and  valuable  papers  of  any 
kind,  and  other  valuable  personal  property,  and 
guaranteeing  their  safety  upon  such  terms  and 
for  such  compensation  as  may  be  agreed  upon  by 
the  company  and  the  respective  bailors  thereof, 
and  to  rent  vaults  and  safes  and  other  receptacles 
for  the  purpose  of  such  safe-keeping  and  storage." 


90    The  American  Business  Woman 

In  most  of  the  States  safe  deposit  companies 
are  imder  the  supervision  of  the  banking,  or  other 
proper  departments,  and  are  governed  generally 
by  laws  similar  in  character  to  those  relating  to 
trust  companies,  with  such  modifications  as  are 
required  by  the  differences  in  the  corporations. 
They  are  generally  forbidden  to  loan  money  on 
property  which  is  left  with  them  for  safe  keeping, 
and  the  stockholders  are  made  liable  to  certain 
amotints  for  all  losses. 

In  some  of  the  States  no  special  statutory 
provisions  have  been  made  for  the  restriction  and 
regulation  of  safe  deposit  companies,  and  in  such 
cases  the  legal  liability  of  such  companies  in  case 
of  loss  of  deposited  valuables  will  be  no  greater 
than  that  of  other  storage  companies  which  receive 
and  store  valuable  goods  for  compensation. 
And  this  statement  will  be  a  sufficient  reason  for 
the  cautious,  if  any,  use  of  such  companies. 

The  companies  have  the  right,  in  case  the  rent 
of  vaults  or  safes  shall  remain  unpaid  for  a  period 
of  three  years,  and  upon  giving  notice  by  mail 
to  the  persons  hiring  the  vaults  or  safes,  to  open 
the  vaults  or  safes  in  the  presence  of  the  officers 
of  the  company  and  a  notary  public,  and  to 
place  the  contents  in  the  general  vaults,  in  order 
that  the  safes  or  vaults  may  be  rented  to  other 
parties. 

A  properly  arranged  safe  deposit,  or  the  pre- 
mises in  which  the  business  of  a  safe  deposit  com- 


Trust  and  Safe  Deposit  Companies    91 

pany  is  carried  on,  may  be  described  generally  in 
the  following  manner : 

The  building  is  a  strong  and  substantial  one, 
which  is  as  nearly  fire-proof  and  burglar-proof 
as  it  can  be  made,  and  protected  at  all  times  by 
numerous  reliable  guards  and  watchmen.  The 
main  portion  of  the  building  is  divided  into  a 
large  number  of  fire-proof  compartments,  of 
sizes  varying  from  small  boxes  for  the  reception 
of  papers  to  large  vaults  for  the  storage  of  valu- 
ables of  considerable  bulk,  each  with  its  special 
locks  and  keys,  and  all  separated  from  the  offices 
and  waiting-rooms  by  several  massive  steel  doors 
which  are  situated  at  various  places  along  the 
passage  ways.  All  the  locks  and  bolts  are  of  the 
most  powerful  and  approved  kind;  guards  are 
properly  stationed  at  all  gates  or  doors;  and 
various  other  precautions,  such  as  pass- words, 
admission  cards,  requiring  the  giving  of  names, 
etc.,  are  taken  to  prevent  the  entrance  of  such 
persons  as  may  have  no  right  to  be  upon  the 
premises. 

Selection  of  a  Safe  Deposit. — In  addition  to 
the  precautions  which  have  been  mentioned  in 
the  preceding  chapters  for  the  careful  selection 
of  banks,  savings  banks,  and  trust  companies,  and 
which  evidently  will  apply  with  equal  force  to 
the  selection  of  safe  deposit  companies,  an  inspec- 
tion of  the  premises  should  be  made  before  deciding 


92    The  American  Business  Woman 

upon  the  particular  safe  deposit  company  with 
which  to  entrust  the  most  valuable  of  one's 
articles  of  property — articles  which,  at  the  same 
time,  may  be  of  the  kind  which  will  be  most  likely 
to  be  stolen. 

There  are  considerable  differences  between  the 
plans  and  arrangements  of  the  various  safe  deposits 
as  well  from  the  point  of  view  of  convenience  and 
personal  liking,  as  from  that  of  actual  strength 
and  security;  and  the  officers  of  safe  deposit 
companies  will,  at  reasonable  times,  cheerfully 
and  courteously  show  their  premises  to  intended 
patrons  whose  appearances  shall  be  indicative 
of  proper  intentions. 


Hiring  Safes. — The  process  of  hiring  safes 
or  vaults  of  a  safe  deposit  company  is  usually 
quite  simple  and  direct.  The  person  wishing  to 
hire  a  safe,  having  made  her  choice  among  the 
safe  deposit  companies  which  are  at  her  disposal, 
and  having  been  introduced  to  the  proper  officers, 
selects  her  safe  or  vault ;  comes  to  an  understanding 
with  regard  to  the  rental,  times  of  payment,  etc. ; 
gives  her  name,  address,  and  other  required  in- 
formation or  references  to  the  officers;  signs  an 
agreement  stating  the  term  for  which  the  safe 
is  hired,  the  rental,  times  of  pa5mient,  etc.,  if 
required;  pays  the  amount  of  the  first  payment; 
and   receives   the   keys,    pass-words,    and    other 


Trust  and  Safe  Deposit  Companies    93 

instructions  which  may  be  necessary  for  obtaining 
admittance  to  the  safes. 

Because  of  the  peculiar  liability  of  safe  deposit 
companies  to  the  danger  of  robbery,  it  may  be 
presumed  that  they  will  exercise  extraordinary 
care,  not  only  in  the  actual  guarding  of  the  valu- 
able property  which  has  been  entrusted  to  them, 
but  also  in  the  selection  of  their  patrons.  Proper 
introductions  at  the  safe  deposit  companies,  when 
seeking  to  engage  safes  or  vaults,  will,  therefore, 
be  the  means  of  saving  considerable  time  and  of 
otherwise  facilitating  the  proceeding. 

The  pass- words  and  instructions  for  the  purposes 
of  admittance  which  are  received  at  the  safe 
deposits  must  be  carefully  and  accurately  remem- 
bered, for,  at  least  until  depositors  shall  become 
well  known  to  the  clerks  and  guards,  any  hesita- 
tion or  forgetfulness  on  the  part  of  depositors 
will  tend  to  interfere  with  or  prevent  their  free 
entrance  to  the  safes. 


CHAPTER  V 

THE  GENERAL  PRINCIPLES  OF  INVESTMENT 

THE  principles  and  methods  of  business  which, 
thus  far,  have  been  elucidated  in  this  volume, 
have  relation  chiefly  to  institutions  which  are 
commonly  used  either  as  mediums  for  the  con- 
venient transaction  of  business  (banks  and  safe 
deposit  companies),  or  as  depositories  for  money 
while  awaiting  more  permanent  dispositions — 
that  is  as  temporary  investments  (savings  banks 
and  trust  companies).  We  have  now  come  to 
the  consideration  of  the  more  lasting  and  regular 
sources  of  income  which,  because  they  are  intended 
to  endure  indefinitely,  we  call  permanent  invest- 
ments, and  which,  since  they  are  the  foundations 
upon  which  our  fortimes  will  depend,  can  scarcely 
be  treated  with  too  much  care  and  diligence. 

Investment  and  Speculation. — The  word 
''invest"  primarily  means  to  clothe  in  or  with,  to 
cover  with,  hence,  to  protect  with;  it  carries  with 
it  the  ideas  of  security,  comfort,  and  permanence, 
for  our  clothing  protects  us  against  the  weather 
and  affords  us  comfort  during  our  entire  lives. 

94 


General  Principles  of  Investment    95 

The  words  ''invest"  and  "investment"  are  far 
too  commonly  used  in  the  sense  which  properly 
belongs  to  the  words  "speculate"  and  "specu- 
lation," and  the  general  failure  to  observe  and 
recognize  the  wide  differences  between  the  mean- 
ings of  such  words  is  perhaps  broadly  indicative 
of  the  loose  and  careless  spirit  of  the  age. 

To  "speculate"  signifies  to  spy  out,  to  search 
joYy  to  explore  the  unknown,  hence,  to  experiment. 
The  suggestion  of  chance  and  risk  which  the 
investor  seeks,  first  of  all,  to  avoid,  is  included  in 
the  meaning  of  the  word.  To  play  a  game  of 
chance  for  a  valuable  stake  is  to  speculate.  To 
say  that  a  man  invested  his  money  in  a  game  of 
chance  is  actually  to  make  use  of  the  gibberish 
of  a  fool,  yet  to  many  persons  even  the  degree  of 
misapplication  of  terms  which  is  present  in  such 
an  expression  will  appear  only  with  difficulty. 
Modem  tendencies  have  brought  these  divergent 
words  into  such  close  relationship  that  we  con- 
tinually hear  of  persons  who  have  purchased 
railroad  stocks  or  mining  stocks,  "not  as  specula- 
tions, but  as  investments,"  meaning  probably 
that  the  stocks  have  been  fully  paid  for,  instead 
of  having  been  purchased  "on  margin,"  and  that, 
therefore,  the  purchasers  may  hold  the  stocks 
over  possible  periods  of  depression  without  almost 
certain  loss.  In  reality,  such  an  operation  may 
be  considered  as  a  speculation,  in  which  only  that 
degree  of  caution  which  is  common  to  all  persons, 


96    The  American  Business  Woman 

except  simpletons  and  gamblers,  has  been  made 
use  of. 

The  safest  fundamental  principle  with  regard 
to  the  management  of  property  is  to  abstain 
entirely  from  speculation;  or  in  other  words,  to 
confine  all  financial  operations  entirely  to  regular 
and  well-known  forms  of  investment.  As  will  be 
explained  later  on,  there  are  methods  of  specu- 
lation which  approach  so  nearly  to  investments 
that  they  are  perhaps  permissible  to  persons  who 
are  possessed  of  extraordinary  shrewdness  and 
special  ability.  There  are  also  speculations,  vary- 
ing all  the  way  from  those  in  which  the  chances 
are  probably  in  favor  of  success,  to  such  as  will, 
almost  without  exception,  result  in  heavy  loss 
or  ruin.  It  is,  however,  a  fact  beyond  reasonable 
question  that  the  proportion  of  speculating  men 
who  are  successful  in  the  long  run  is  almost  in- 
finitesimal— perhaps,  the  world  over,  one  in  ten 
thousand — and  scarcely  a  notable  exception  to 
the  general  and  broad  statement,  that  women 
always  lose  when  they  speculate,  can  be  called 
to  mind. 

For  the  practical  application  of  the  rule  to 
avoid  speculation,  and  to  confine  financial  trans- 
actions strictly  to  investments,  satisfactory  meth- 
ods of  discriminating  between  investments  and 
speculations  will  be  necessary,  for  it  must  be  ad- 
mitted that  exact  distinctions  between  them  will  not 
be,  always  and  to  all  persons,  without  difficulties. 


General  Principles  of  Investment    97 

From  the  definitions  which  have  been  given,  it 
may  be  inferred  that  the  practical  distinction 
between  investments  and  speculations  will  in- 
volve the  element  of  safety.  Such  dispositions 
of  money  as  are  universally  admitted  to  be  with- 
out risk,  having  long-established  and  well-known 
kinds  of  securities  (such  as  mortgages  for  example), 
are  investments,  and  all  dispositions  of  money 
in  manners  which  are  untried,  experimental,  or 
known  to  be  dangerous,  are  speculations. 

Another,  and  perhaps  a  more  definite  rule  of 
distinction,  is  this:  If  money  is  placed  for  the 
purpose  of  obtaining  an  increase  in  the  principal, 
the  transaction  is  a  speculation;  if  money  is  placed 
for  the  purposes  of  seciuing  the  principal  and 
obtaining  a  regular  income,  the  transaction  is  an 
investment.  This  rule  of  distinction  will  give 
rise  to  the  suggestions  that  all  forms  of  speculation 
are  not  necessarily  dangerous,  and  that  all  forms 
of  investment  are  not  necessarily  free  from  danger. 
And  as  illustrations  it  may  be  said  that  the  pur- 
chase of  first-class  improved  real  estate,  for  the 
purpose  of  obtaining  a  profit  by  the  enhancement 
of  values,  will  be  a  speculation  which  may  be 
without  danger,  while  the  purchase  of  dividend- 
paying  stocks,  for  the  purpose  of  obtaining  an 
income,  will  be  an  investment  which  will  often 
prove  to  be  dangerous. 

The  accuracy  of  such  statements  cannot  be 
doubted;    but,    instead    of    permitting    cautious 


98     The  American  Business  Woman 

owners  of  property  to  depart  from  the  general 
rule  to  avoid  speculations,  they  may,  for  purposes 
of  a  greater  degree  of  safety,  serve  to  confine 
the  financial  transactions  of  property  owners, 
not  only  to  investments,  but  to  certain  kinds  of 
investments,  the  peculiar  advantages  of  which 
will,  in  the  course  of  the  following  pages,  be  made 
plain. 

Purchase  Investments  and  Loan  Invest- 
ments.— For  the  purposes  of  discussing  the  general 
principles  of  investment,  it  will  be  necessary  to 
divide  investments  into  two  general  classes :  first, 
the  class  in  which  investors  become  the  absolute 
owners  of  the  securities,  as  in  purchases  of  real 
estate,  Government  bonds,  etc. — which  may  be 
called  purchase  investments:  and,  second,  the  class 
in  which  investors  advance  money  upon  the  prom- 
ises of  borrowers  to  return  the  money  with  interest, 
and  upon  the  securities  which  the  borrowers  pledge 
or  bind  in  support  of  their  promises,  as  in  loans 
upon  mortgages — which  may  be  termed  loan 
investments. 

Of  the  two  general  classes  of  investments,  the 
former,  at  first  glance,  appears  to  be  the  more 
advantageous;  for,  if  securities  shall  not  be  suffi- 
cient when  they  are  actually  owned  and  con- 
trolled by  investors,  it  may  be  difficult  to  suggest 
a  manner  in  which  the  securities  may  be  made 
sufficient.     But,  on  the  other  hand,  loan  invest- 


General  Principles  of  Investment    99 

merits,  properly  made,  will  enjoy  an  excess  of 
security,  which  will  not  often  be  present  in  pur- 
chase investments.  Thus,  if  an  investor  shall 
loan  the  sum  of  ten  thousand  dollars  upon  bond 
and  mortgage,  the  value  of  the  mortgaged  premises 
may  be  twenty  thousand  dollars ;  but  if  real  estate, 
which  is  worth  ten  thousand  dollars  shall  be 
purchased,  it  may  be  presumed  that  the  purchase 
price  will  amount,  at  least  very  nearly,  to  ten 
thousand  dollars. 

The  two  general  classes  of  investments  will, 
at  certain  points  of  the  discussion  upon  which 
it  is  now  necessary  to  enter,  require  somewhat 
different  methods  of  treatment.  They  may,  how- 
ever, be  more  conveniently  considered  together, 
by  the  aid  of  proper  suggestions  and  explanations, 
by  way  of  distinction,  whenever  such  appear  to  be 
necessary. 

Safety  of  Investments. — The  first  important 
consideration  concerning  investments  is  that  they 
shall  be,  as  nearly  as  possible,  absolutely  safe; 
and  the  second  is  that  they  shall  return  fair  and 
regular  incomes.  These  two  considerations  will 
be  found  to  comprehend  the  entire  discussion  of 
the  general  subject  of  investments. 

Taking  up  the  discussion  of  the  considerations 
in  the  order  in  which  they  have  been  mentioned, 
it  must  be  remarked  that  there  are  two  general 
requisites   for   the   safety   of   investments:    first, 


100  The  American  Business  Woman 

there  must  be  real  and  ample  securities  for  the 
money  which  is  invested;  and,  second,  the  securi- 
ties must  be  within  the  control  of  the  investors. 

In  order  that  securities  may  be  real  and  ample 
they  must  have  actual  and  permanent  values 
amoimting  to  considerably  more  than  the  amounts 
which  have  been  invested;  for,  at  best,  there  are 
always  possibilities  which  will  require  margins 
on  the  side  of  caution,  and  an  indefinite  or  un- 
known security,  or  one  which  may  be  subject 
to  serious  fluctuations,  and  may  even  disappear 
entirely  at  some  future  time,  amounts  practically 
to  no  security  at  all. 

Margin  of  Safety. — The  difference  between 
the  actual  and  permanent  values  of  securities  and 
the  amounts  of  the  corresponding  investments,  or, 
— since  it  must  be  assumed  that,  under  no  possible 
circumstances,  will  the  difference  be  upon  the 
wrong  side, — the  excesses  of  the  actual  and  per- 
manent values  of  securities  over  the  amounts  of 
the  corresponding  investments  may  be  termed  the 
margins  of  safety. 

In  this  place  will  appear  the  principal  necessity 
for  the  distinction  which  has  been  made  between 
purchase  investments  and  loan  investments.  In- 
deed, difficulties  in  the  way  of  applying  the  rules 
which  have  been  given  the  purchase  investments 
seem  here  to  present  themselves.  Thus,  the 
rule  which  requires  the  margin  of  safety  evidently 


General  Principles  of  InveStmie-n'tten^ 

cannot  be  satisfied  with  respect  to  purchase 
investments  unless  either  the  securities  shall  be 
purchased  at  prices  which  are  considerably  less 
than  their  actual  and  permanent  values,  or  the 
necessary  margin  of  safety  shall  be,  in  some  other 
manner,  supplied.  So,  also,  the  application  of 
this  rule  to  piu"chase  investments  appears  to 
conflict  with  the  rule  which,  for  the  greatest 
safety,  requires  the  avoidance  of  speculations; 
for,  if  purchase  investments  cannot  safely  be 
made  without  obtaining  direct  increases  to  the 
principals  of  the  investments,  it  may  be  difficult 
to  perceive  wherein  they  differ  from  speculations. 
These  objections  will  have  the  practical  effect 
of  removing  from  the  list  of  permissible  invest- 
ments many  kinds  of  purchase  investments,  and 
that  such  a  result  is  neither  unintentional  nor 
deplorable  will  be  sufficiently  demonstrated  in 
the  succeeding  chapters  of  this  work.  Neverthe- 
less there  are  certain  kinds  of  purchase  investments 
with  respect  to  which  the  overcoming  of  the 
objections  which  are  now  under  consideration 
will  not  be  difficult.  Such  purchase  investments 
(which  are  to  be  distinguished  from  speculations 
because,  although  they  may,  and  assuredly  ought 
to,  furnish  increases  to  the  principals,  the  chief 
purpose  is  the  obtaining  from  them  of  regular 
incomes)  will  provide  the  necessary  margins  of 
safety  by  means  of  the  excesses  of  actual  values 
over    the    piu-chase    prices,    and    also    by    the 


102:  The  American  Business  Woman 

enhancements  of  values  which  must  not  fail  to 
appear. 

It  may  also  be  remarked  that,  since  in  purchase 
investments  the  securities  are,  in  the  greatest 
possible  degree,  within  the  control  of  the  investors, 
the  necessity  for  large  margins  of  safety  will  be 
much   less   than   in   cases   of  loan   investments. 

The  principle  of  the  margin  of  safety  will  be 
better  understood  after  a  study  of  the  succeeding 
chapters  upon  the  subjects  of  mortgages  and  real 
estate. 

Valuation  of  Securities. — The  importance 
of  correct  valuations  of  the  securities  upon  which 
investments  are  to  be  made  .can  scarcely  be 
overestimated,  seeing  that  the  securities  are  to  be 
regarded  as  the  foundations  upon  which  the  safety 
of  investments  must  rest.  And  the  greater  care 
must  be  devoted  to  the  work  of  determining  the 
valuations,  for  the  reason  that,  obviously,  no 
general  rules  for  the  guidance  of  investors  in  this 
respect  can  be  devised.  The  skill  and  judgment  of 
investors  will  here  meet  with  the  greatest  difficul- 
ties, which,  however,  need  not  dismay  investors, 
since  they  have  been  overcome  in  every  successful 
investment. 

The  method  of  investigation  by  means  of  which 
acctu*ate  valuations  of  securities  are  to  be  obtained 
may  be  described  in  the  following  manner  : 

The  average  actual  values  (that  is  the  obtain- 


General  Principles  of  Investment    103 

able  cash  prices)  which  the  particular  or  similar 
securities  have  maintained,  for  the  greatest 
possible  ntimber  of  past  years,  and  the  present 
actual  values  must  be  ascertained,  and  the  sagacity 
and  judgment  of  investors  must  then  be  depended 
upon  for  correct  conclusions  as  to  the  effects 
which  future  events  will  have  upon  the  values. 
It  will  be  observed  that  this  method  includes  two 
very  different  processes,  the  one  (the  ascertaining 
of  past  and  present  values)  being  often  compara- 
tively simple  and  definite,  while  the  other  (the 
forming  of  correct  conclusions  with  regard  to 
future  values)  is,  in  many  cases,  complex  and 
difficult.  According  as  these  two  processes  can 
or  cannot  be  brought  into  operation,  and  according 
as  the  former,  or  definite  process,  will  or  will  not 
predominate,  in  some  cases,  the  application  of 
the  method  which  has  been  given  will  directly 
accomplish  the  purposes  in  view;  in  other  cases 
it  will  be  but  partially  successful,  and  in  still 
others  it  will  altogether  fail. 

If  the  proposed  security  for  an  investment  shall 
be  a  plot  of  land,  the  average  price  for  which  the 
land  or  similar  land  in  the  vicinity  has  been  sold 
during  past  years,  and  the  present  value  of  the 
land,  will  not  be  difficult  to  ascertain,  and  the  dif- 
ficulties in  the  way  of  conclusions  concerning  the 
future  values  will  be  reduced  to  minima;  indeed, 
to  such  an  extent  will  the  definite  process  pre- 
dominate that  the  values  which  will  be  furnished 


104    The  American  Business  Woman 

by  it  may  often  be  safely  regarded  as  the  actual 
value  of  the  land.  If  the  proposed  security  for 
an  investment  shall  be  the  stocks  of  a  gas  company 
or  of  a  street  railway,  the  previous  actual  values 
may  be  difficult  to  ascertain,  and  cannot  be  safely 
depended  upon  to  fix  the  permanent  actual  values, 
because  new  conditions  (such  as  increases  or 
decreases  in  the  population  which  supports  the 
enterprise,  adverse  legislation,  or  injurious  com- 
petition), which  will  seriously  interfere  with  the 
calculation  may  and  probably  will  arise.  If  the 
stock  of  a  corporation,  which  has  been  recently 
organized  for  the  manufacture  of  some  special 
novelty,  shall  be  the  security  which  is  offered,  it 
is  evident  that  the  actual  value  of  the  security 
will  depend  alone  upon  the  future  success  of  the 
novelty  which  is  to  be  manufactured,  and  the 
method  which  is  in  question  will  be  impossible  of 
application. 

Notwithstanding  exceptions  such  as  have  been 
suggested,  for  the  purposes  of  general  results, 
the  method  which  is  under  consideration  will 
prove  to  be  satisfactory  and  sufficient.  Indeed, 
even  in  exceptional  cases,  the  method  will  not 
altogether  fail,  for  though  the  desired  valuations 
cannot  by  its  use  be  determined,  the  general 
character  of  the  securities  as  uncertain  and  unsafe 
will  be  fully  established. 

The  necessary  magnitude  of  the  margin  of 
safety  will  depend  to  a  considerable  extent  upon 


General  Principles  of  Investment    105 

the  character  of  the  securities.  For  reasons  which 
have  been  already  suggested,  the  present  margins 
of  safety  in  purchase  investments,  which  are  in 
other  respects  entirely  satisfactory,  may,  indeed, 
be  small;  while  in  loan  investments  generally  it 
may  be  said  that  the  larger  the  margins  of  safety 
shall  be  the  better  will  be  the  characters  of  the 
investments.  If  the  securities  for  loan  invest- 
ments shall  be  in  every  respect  first  class,  margins 
of  safety  of  from  twenty-five  to  forty  per  cent,  may 
be  accepted;  if  the  securities  shall  be  somewhat 
uncertain  in  character,  much  greater  margins 
must  be  required;  and  if  the  securities  shall  be  of 
dangerous  kinds,  the  margins  of  safety  must  be 
infinitely  large — that  is,  the  investments  must  not 
be  made  at  all. 

A  loan  which  is  secured  by  a  mortgage  on  good 
real  estate  in  the  city  of  New  York  will  be  generally 
considered  to  be  perfectly  safe  if  it  shall  amount 
to  sixty  or  even  a  greater  percentage  of  the  ordi- 
nary value  of  the  real  estate ;  a  loan  upon  the  stock 
of  a  manufacturing  company,  or  of  a  railroad 
company,  will  require  a  very  much  larger  margin 
of  safety,  if  such  a  loan  shall  be  considered  at  all; 
and  a  loan  upon  a  chattel  security,  such  as  horses 
or  live  stock,  which  may  be  lost  through  death  or 
removal,  will  not  be  for  a  moment  entertained 
by  a  careful  person. 

The  laws  of  a  country  or  State  may,  and  in 
many  cases  do,  have  a  vital  effect  upon  the  safety 


io6    The  American  Business  Woman 

of  investments,  because  evidently  laws  may  be 
entirely  adequate  for,  inadequate  for,  or  even 
obstructive  to,  the  remedies  which  are  necessary 
for  the  protection  of  investors.  The  regular 
precautions,  which  are  necessary  for  the  avoidance 
of  such  difficulties,  will  require  investors  to  have 
the  laws  of  the  different  States  in  which  they  shall 
propose  to  make  investments  carefully  examined, 
and  such  proceedings  cannot  fail  to  be  advanta- 
geous even  though  they  may  involve  considerable 
expenditures.  A  simpler  way  out  of  the  difficulty, 
however,  and  at  the  same  time  a  practice  which 
will  probably  produce  more  satisfactory  results 
in  the  majority  of  cases,  is  that  of  confining 
investments  to  the  particular  States  in  which 
investors  shall  reside,  with  the  general  statutory 
principles  of  which,  affecting  investments,  they 
should  be  familiar.  If  an  intermediate  course 
shall  be  desired,  investments  may  be  restricted 
to  the  older  and  well-settled  States,  in  which 
investors  shall  have  reasons  to  believe  that  they 
will  find  impartial  and  ample  protection  in  the 
laws. 

Control  of  Securities. — It  is  self-evident 
that  if  the  securities  for  investments  shall  be 
entirely  beyond  the  control  of  the  investors  there 
may  as  well  be  no  securities  at  all,  for  they  are 
worthless — securities  only  in  name.  The  second 
requisite   for    the    safety   of   investments    (that 


General  Principles  of  Investment     107 

securities  shall  be  within  the  control  of  investors) , 
in  its  absolute  sense  therefore  needs  no  demon- 
stration. But  there  are  distinctions  and  amplifi- 
cations, in  the  matters  of  securities  and  their 
control,  which  must  be  noted. 

In  the  first  place,  then,  the  real  securities  for 
investments  must  not  be  confounded  with  the 
mere  evidences  of  the  securities,  the  word  "secur- 
ity" being  used  in  the  original  and  proper  sense 
(that  which  secures,  or  makes  safe),  and  not  in  a 
derived  sense  of  an  evidence  of  debt,  such  as  a 
bond.  If  an  investor  shall  purchase  a  house,  the 
house  itself  will  be  the  real  security  for  the  money 
invested,  and  the  deed  which  the  investor  receives 
from  the  vendor  will  be  merely  the  evidence  of 
the  security.  If  an  investor  shall  loan  money  on 
land,  the  land  will  be  the  security,  and  the  bond 
and  mortgage  will  be  the  evidences  of  the  debt 
and  of  the  security.  If  money  shall  be  invested 
in  the  stock  of  a  bank,  the  capital  and  surplus 
of  that  bank  will  be  the  real  security  and  the 
certificates  of  stock  merely  the  evidences.  In 
every  case,  it  is  the  actual  security  (that  property 
to  which  eventually  investors  must  look  to  make 
good  their  investments)  over  which  investors 
must  be  able,  in  case  of  necessity,  to  exercise 
control. 

With  regard  to  the  extent  or  quantity  of  control 
which  is  necessary  for  the  safety  of  investments 
it  is  obvious  that,  other  things  being  equal,  the 


io8    The  American  Business  Woman 

more  perfect  the  investors'  control  of  the  security 
becomes,  the  safer  will  become  the  investments; 
and  the  control  will  be  perfect  only  when  investors 
shall  own,  or,  without  fail,  may  own,  absolutely 
and  alone,  the  entire  securities.  If  an  investor 
shall  singly  purchase  and  own  free  and  clear  real 
estate,  other  conditions  having  been  properly 
fulfilled,  the  transaction  will  be  a  perfect  invest- 
ment; for  the  real  security  will  be  absolutely 
within  the  control  of  the  investor.  If  an  investor 
shall  loan  money  upon  real  estate  which  shall 
properly  satisfy  the  requirements  in  other  respects, 
the  transaction  will  be  a  perfect  investment, 
because  the  entire  security — the  real  estate — may 
without  fail  be  reduced  to  the  possession,  owner- 
ship, and  perfect  control  of  the  investor  if  the 
necessity  for  such  action  shall  at  any  time  arise. 
If  an  investor  shall  purchase  the  stock  of  the 
most  profitable  and  best-managed  railway  in  the 
land,  the  transaction  will  not  be  a  perfect  invest- 
ment, because  the  real  security  (which  in  this 
case  will  be  composed  of  the  paid-in  capital, 
rolling  stock,  undivided  profits,  and  other  market- 
able property  belonging  to  the  railroad  company) 
will  be  beyond  the  reach  and  control  of  the  single 
stockholder,  and  the  investor  will  be  forced  to 
depend  upon  a  fictitious  and  uncertain  security — 
the  market  value  of  the  stock.  The  requisite 
that  investors  shall  control  their  securities  is, 
therefore,    in    the    broadest    significance,    to    be 


General  Principles  of  Investment    109 

fulfilled,  when  such  control  shall  apply  to  real 
securities,  and  when,  avoiding  all  partnerships 
and  joint  transactions,  investors  shall  make  their 
investments  on  their  own  responsibilities  and  for 
themselves  alone. 

Incomes  from  Investments. — Under  the  title 
of  the  general  principles  of  investment,  there 
remains  now  to  be  discussed  the  consideration 
that  investments  shall  return  fair  and  regular 
incomes.  At  first  thought,  such  a  discussion  may- 
seem  to  be  of  little  importance,  since  investments 
are  uniformly  made  for  the  very  purpose  of 
obtaining  therefrom  regular  incomes.  The  impor- 
tance of  a  thorough  imderstanding  of  this  consider- 
ation will,  however,  appear  without  difficulty  as 
the  discussion  proceeds. 

Since  the  incomes  which  are  to  be  derived  from 
investments  are  of  such  vital  importance,  it  is 
essential  that  they  shall  be  sure,  or  as  nearly  so  as 
the  caution  and  judgment  of  the  investors  can 
make  them;  otherwise  expressed,  incomes  from 
investments  must  be  free  from  unusual  contin- 
gencies and  possibilities  of  fluctuation.  An  excel- 
lent nile  for  the  attainment  of  this  essential  is 
that  investments  shall  be  made  upon  securities 
which  are  of  such  a  character  as  to  be  the  last  of 
all  kinds  of  property  to  feel  the  effects  of  depressing 
circumstances.  This  condition  will  be  best  fulfilled 
when  the  seciuities  shall  be  such  as  are  most 


no    The  American  Business  Woman 

necessary  to  those  who  shall  directly  pay  the 
incomes.  Thus  a  mortgagor  will,  if  necessary, 
refuse  to  pay  other  debts  in  order  to  pay  the  inter- 
est upon  a  mortgage  which  is  a  lien  upon  his 
property,  because,  otherwise,  he  may  lose  the 
house  which  shelters  him  and  his  family;  a  tenant 
of  desirable  premises  will  make  the  greatest  effort 
to  pay  his  rent,  lest  he  be  dispossessed,  and  the 
necessary  premises  taken  from  him ;  but  the  mort- 
gagor of  property  which  is  a  mere  luxury,  will, 
in  case  of  financial  difficulty,  first  of  all,  refuse  to 
pay  the  interest  upon  the  mortgage,  and  let  the 
luxury  go ;  and  the  first  act  of  economy  of  a  failing 
corporation  will  be  the  refusal  to  pay  dividends 
on  its  stock,  in  order  that  necessary  expenses 
may  be  paid. 

The  principles  which  have  been  explained  in  the 
earlier  pages  of  this  chapter  affect  directly  the 
certainty  of  incomes  from  investments;  for  it  is 
plain,  since  the  principal  debts  and  the  interest 
are  merely  separate  parts  of  the  entire  obligations 
of  the  borrowers,  that  any  rule  of  conduct  which 
shall  secure  the  principals  will  also  secure  the 
incomes,  and  the  same  sound  judgment  which  shall 
make  the  piirchased  or  mortgaged  securities 
good  and  sufficient  will  also  make  sure  fair  incomes 
from  the  investments. 

In  an  especial  manner  the  margin  of  safety 
will  be  found  to  affect  the  certainty  of  incomes. 
If  in  loan  investments  the  margins  of  safety  shall 


4 


General  Principles  of  Investment    iii 

be  large,  the  borrowers  will  evidently  make  all 
reasonable  efforts  to  pay  their  interest,  in  order 
that  their  equivalent  equities  in  the  securities 
shall  not  be  lost.  So,  also,  if,  in  purchase  invest- 
ments, there  shall  be  ample  margins  of  safety, 
small  incomes,  as  compared  with  the  actual 
values  of  the  securities,  will  prove  to  be  satisfactory, 
and  the  incomes  will  therefore  be  the  more  easily 
obtainable. 

In  stating  the  consideration,  which  is  at  present 
in  question,  the  words  "fair"  and  ''regular** 
have  been  used  as  qualifying  the  incomes  which 
ought  to  be  received  from  good  investments.  These 
qualifications  are  founded  upon  practical  and 
almost  invariable  reasons,  and  cannot  be  neglected 
without  risks  of  serious  and  injurious  results. 

The  necessity  that  incomes  shall  be  regular 
has  been  sufficiently  explained  in  an  earlier  chapter 
of  this  work,  and  the  quality  of  regularity  will 
be  sufficiently  secured  by  proper  agreements  with 
those  who  are  to  pay  the  incomes,  and  by  the 
application  of  the  principles  which  have  been 
discussed  in  the  earlier  portions  of  the  present 
chapter. 

It  may  be  accepted  as  a  general  rule  of  very 
wide  application  that  the  relative  amounts  or 
percentages  of  incomes  from  investments  will 
vary  directly  as  the  risks  which  shall  be  incurred ; 
that  is,  greater  relative  incomes  will  involve 
greater  risks,  and  smaller  relative   incomes   will 


112    The  American  Business  Woman 

involve  less  risks,  or  will  secure  greater  safety.  If 
a  person  shall  desire  to  borrow  upon  real  estate 
so  great  an  amount  of  money  that  the  margin  of 
safety  will  be  dangerously  small,  the  borrower 
will  be  compelled  to  pay  large  rates  of  interest, 
because  the  risks  will  be  so  great  that  none  but 
the  avaricious  will  consider  the  investment. 
A  tenant  who  shall  conduct  a  hazardous  kind  of 
business  must  pay  high  rent  for  his  premises,  be- 
cause only  greedy  landlords  will  accept  such  risks 
of  having  their  property  destroyed.  So,  fraudu- 
lent schemes  of  speculation  or  of  investment  are 
almost  always  advanced  and  recommended  upon 
the  ground  that  the  profits  will  be  exceptionally 
large. 

But  it  will  be  suggested  that  there  may  exist, 
at  certain  times,  exceptional  circumstances  which 
will  enable  investors,  with  perfect  safety,  to 
obtain,  at  least  for  short  periods,  relative  incomes 
which  shall  be  greater  than  the  accepted  averages. 
Undoubtedly  there  may  be  such  opportunities; 
but  the  suggestion  tends  toward  the  encourage- 
ment of  a  greed  for  temporary  advantage  which 
is,  indeed,  much  to  be  deplored.  The  true  theory 
of  investment  looks  always  to  the  qualities  of 
regularity  and  permanence,  and  wisely  refuses 
to  consider  temporary  advantages,  which  are 
generally  to  be  obtained  only  at  the  cost  of 
corresponding  future  disadvantages.  The  mort- 
gagor, who  may  be  compelled  by  circimistances 


General  Principles  of  Investment    113 

to  pay  temporarily  a  high  rate  of  interest,  will 
seize  with  avidity  the  first  opportunity  to  repay 
the  loan,  by  obtaining  the  necessary  money  from 
other  sources,  at  a  lower  rate  of  interest,  and  the 
greedy  investor  may  then  be  forced  to  accept 
trust  company  rates  while  searching  for  new  invest- 
ments. The  tenant,  whose  landlord  shall  take 
advantage  of  special  circumstances  to  demand  an 
unfair  rent,  will  gladly  move  when  the  opportunity 
shall  be  presented,  and  with  no  regrets  that,  by 
so  doing,  he  will  cause  for  the  landlord  the  loss 
and  expense  which  will  follow  the  vacating  of  the 
premises.  Thus  it  is  that,  while  exercising  all 
reasonable  shrewdness  in  the  search  for  invest- 
ments which  will  pay  well,  investors  should  see 
to  it  that  their  incomes  shall  not  be  materially 
greater  than  the  safe,  average  incomes  which 
are  derived  from  similar  investments. 

Usury. — The  inclination  towards  avarice  which 
has  been  manifested  by  a  large  proportion  of  those 
who  are  able  to  loan  money  to  their  less  fortunate 
neighbors,  and  the  forced  willingness  on  the  parts 
of  the  borrowers  to  agree  to  almost  any  rates  of 
interest  for  the  sake  of  obtaining  necessary  money 
without  delay,  have  been  the  causes  of  the  enact- 
ment of  laws,  in  the  different  States  of  otu*  country, 
and  in  other  countries,  for  the  regulation  of  the 
rates  of  interest  which  may  be  received  for  the 
use  of  money. 


114    The  American  Business  Woman 

The  term  usury  originally  signified  the  taking 
of  money  for  the  use  of  other  money  (or  interest) 
and  was  considered  to  be  at  least  a  dishonorable 
practice;  it  is  now  defined  as  the  receiving  of  a 
higher  rate  of  interest  than  that  which  is  allowed 
by  the  laws.  The  general  effect  of  the  usury  laws 
is  to  make  usury  illegal,  in  some  of  the  States 
criminal,  involving  a  forfeiture  of  principal  or 
interest  or  both,  and  when  criminal,  a  punishment 
by  fine  and  imprisonment. 

The  usury  laws  of  the  different  States  vary 
considerably  with  respect  to  the  rates  of  interest 
which  are  prescribed  by  tfeem  (that  is  the  presumed 
rates  when  none  have  been  agreed  upon),  the 
legal  rates  of  interest  varying  all  the  way  from 
five  to  ten  per  cent,  per  annum,  and  the  specified 
rates  which  are  allowed  to  be  contracted  for 
varying  from  six  per  cent,  to  twelve  per  cent, 
per  annum. 

During  recent  years  there  has  been  a  tendency 
in  many  of  the  States  to  lessen  the  so-called 
severity  of  the  usury  laws,  by  allowing  contracting 
parties  to  agree,  either  in  writing  or  otherwise,  to 
pay  and  receive  any  rates  of  interest,  however 
high.  Such  laws  have  already  been  enacted  in 
several  of  the  States. 

An  inquiry  into  the  reasons  for,  and  the  causes 
of,  legislation  of  this  kind  seems  to  result  in  con- 
clusions which  are  against  the  security  and  advan- 
tage of  loan  investments  in   these   States.     The 


General  Principles  of  Investment    115 

« 

laws  which  are  under  consideration  cannot  be 
presumed  to  rest  alone  upon  the  broad  grounds 
that  our  money  is  our  own  private  property,  and 
that,  therefore,  we  ought  to  have  the  right  to 
obtain  whatever  rates  of  interest  are  possible  for 
the  use  of  it;  for  such  contentions  have  long  ago 
been  set  aside,  though  admitted  to  be  technically 
correct,  by  the  necessities  and  benefits  of  public 
policy.  Moreover,  it  is  difficult  to  believe  that  a 
majority  of  the  people  will  agree  to  such  legislation 
upon  grounds  which,  to  many,  will  appear  to  be 
so  abstract.  Neither  can  we  believe  that  the 
influence  of  greedy  money-lenders  in  these  particu- 
lar States  has  been  sufficient  to  overcome  the 
will  of  the  people.  The  conclusions  must,  there- 
fore, be  that  States  the  legislatures  of  which  have 
thought  it  wise  to  depart  so  widely  from  the  old 
and  well-settled  rules  for  the  prevention  of  usury 
have  found  it  necessary  to  offer  imusual  induce- 
ments for  the  loaning  of  money  within  their 
borders;  or,  expressed  in  different  fashion,  that 
there  are  reasons  which  tend  to  prevent  the  loaning 
of  money,  and  which  the  law-makers  seek  (by 
means  of  statutes  which  may  have,  upon  prudent 
investors,  precisely  contrary  effects)  to  overcome. 
In  conformity,  then,  with  the  principles  which 
have  been  elucidated,  all  States  in  which  there 
shall  be  practically  no  usury  laws,  or  in  which 
the  ordinary  rates  of  interest  shall  be  exceptionally 
high,  should  be  regarded,  at  least  imtil  the  contrary 


ii6    The  American  Business  Woman 

is  conclusively  proved,   as  unfit  places  for   the 
making  of  loan  investments. 

Complicated  Schemes. — Recent  years  have 
brought  intonotice  many  complicated  propositions, 
some  honest  and  some  fraudulent,  for  the  safe 
and  advantageous  investment  of  capital.  Such 
propositions  are  the  natural  results  of  two  con- 
ditions which  are  consequent  upon  the  rapidly 
increasing  population  of  our  country,  namely: 
the  increasing  difficulty  of  obtaining  safe  invest- 
ments with  satisfactory  returns,  which  condition 
induces  investors  to  entertain  methods  which 
otherwise  would  receive  no  notice  at  all;  and  the 
steadily  increasing  difficulty  of  earning  sufficient 
salaries  or  business  profits  for  the  expensive 
necessities  of  the  age,  which  condition  constantly 
incites  the  inventive  genius  of  the  people  to  the 
discovery  of  new  schemes,  or  modifications  of 
old  schemes,  for  the  easy  acquisition  of  money. 
By  far  the  safest  method  of  deaHng  with  all 
propositions  which  require,  for  the  demonstration 
of  their  feasibility,  complicated  mathematical 
calculations,  or  abstruse  reasoning,  will  be  the 
prompt  refusal  to  consider  them,  without  even  so 
much  as  attempts  to  understand  them.  They 
are  to  be  regarded,  one  and  all,  as  schemes  which 
may  work  out  splendidly  on  paper,  but  which 
will  seldom,  if  ever,  prove  to  be  successful  in 
actual    practice.     They    are    almost    invariably 


General  Principles  of  Investment    117 

evolved,  either  by  skilful  rogues  for  the  purpose 
of  perplexing  innocent  investors,  or  by  visionary 
ne'er-do-wells,  who,  after  having  striven  in  vain 
to  make  their  own  fortunes,  desire  to  apply  the 
genius  of  failure,  which  they  so  largely  possess, 
to  the  imagined  benefit  of  their  friends  and  of 
humanity  at  large.  And,  further,  it  may  be 
remarked,  that  there  is  danger  in  the  simple 
contemplation  of  such  propositions.  For,  to 
many  persons,  there  is  a  fascination  in  logical 
conclusions  and  mathematical  proofs,  which,  too 
much  indulged,  may  lead  to  the  acceptance  of 
ruinous  so-called  investments.  The  theory  of 
a  safe  investment  must  be  simple;  its  initial 
considerations  need  be  only  such  as  these:  so 
much  money  is  to  be  placed  upon  such  security, 
and  the  returns  will  be  so  much  per  year.  Inves- 
tigation, judgment,  and  simple  calculation  will 
often  be  required ;  but  the  education  of  one  learned 
in  higher  mathematics,  or  in  other  sciences,  or 
the  extraordinary  skill  of  an  expert  accountant, 
never. 

Basis  of  Money. — In  all  investments  where 
there  shall  be  agreements  by  which  considerable 
sums  of  money  are  to  be  paid  or  repaid  to  investors 
at  future  times  (therefore,  particularly  in  loan 
investments)  the  character  or  quality  of  the  money 
which  is  to  be  paid  will  be  a  most  important 
consideration. 


ii8    The  American  Business  Woman 

There  are  material  differences  between  the 
moneys  of  different  nations,  and  there  may  be 
equally  important  differences  between  the  values 
of  money,  in  the  same  country,  at  different  times 
and  under  different  conditions. 

A  large  part  of  the  money  of  the  world  is  in 
the  shape  of  paper  bills  or  notes,  which  are,  in 
effect,  printed  promises  of  the  particular  govern- 
ments which  issue  them  to  redeem  them,  on 
demand,  in  some  standard  coin  which  ought  to 
pass  universally  as  actual  money.  The  recognized 
standard,  or  basis  of  money,  the  civilized  world 
over,  is  the  metal  gold,  coins  of  this  metal  and 
of  the  same  weight  and  fineness  having  more 
nearly  the  same  actual  value  or  purchasing  power, 
everywhere  and  at  all  times,  than  coins  of  any 
other  metal. 

The  actual  value  of  a  nation's  paper  money 
will,  therefore,  depend  upon  two  conditions:  first, 
the  nation  must  expressly  or  impliedly  promise 
to  redeem  its  paper  money  in  gold;  and,  second, 
the  good  faith  of  the  nation  must  be  such  that 
its  promises  will  certainly  be  made  good.  If  a 
nation,  having  the  best  possible  credit,  shall 
promise  to  redeem  its  paper  money  in  some  inferior 
or  fluctuating  metal,  the  money  will  evidently 
not  be  of  the  best  kind,  because  the  standard  of 
redemption  will  be  low  or  uncertain  as  compared 
with  the  accepted  gold  standard,  to  which  it 
must  finally  be  reduced.     If  a  nation,  having  no 


General  Principles  of  Investment     119 

credit,  shall  promise  to  redeem  its  paper  money 
in  gold,  the  money  will  be  of  little  actual  value, 
because  the  nation's  promise  will  probably  not 
be  made  good.  And,  finally,  if  a  nation,  having 
perfect  credit,  shall  maintain  at  all  times  a  gold 
standard  of  redemption  for  its  paper  money,  the 
money  will  be  of  the  greatest  possible  value. 

In  a  similar  manner,  it  may  be  demonstrated 
that  the  quality  of  the  money  in  the  same  country 
may  vary,  according  to  the  standards  of  redemp- 
tion which  may  be  in  use  at  different  times,  and 
according  to  the  credit  of  the  nation,  as  affected 
by  prosperity  and  peace  on  the  one  hand,  and  by 
disaster  and  war  on  the  other. 

The  money  of  our  country  has  been  (except 
when  affected  by  wars  and  financial  disorders) 
and  now  is  of  the  best  possible  kind — equal  in 
relative  purchasing  power  to  any  money  in  the 
world ;  but  that  such  honorable  and  judicious  con- 
ditions will  always  be  maintained  is,  unfortimately, 
by  no  means  certain.  It  is,  therefore,  of  great 
importance  to  investors  that  the  money  with 
which  debtors  shall  repay  loans  shall  be  equal  in 
quality  to  the  money  which  has  been  loaned; 
else  investors  will  lose  the  differences. 

The  precautions  which  will  be  necessary  to 
guard  against  such  possibilities  should  be  in  the 
form  of  legal  agreements,  between  investors  and 
borrowers,  to  the  effect  that  loans  shall  be  repaid 
in  certain  designated  kinds  of  money,  in  all  respects 


I20    The  American  Business  Woman 

the  full  equivalents  of  the  money  which  has  been 
loaned.  And,  since  the  money  of  the  United 
States  at  the  present  time  is  equivalent  to  gold 
coin,  agreements  to  repay  loans  may  read:  "In 
gold  coin  of  the  United  States  of  America,  of 
the  present  weight  and  fineness,  or  its  just  and 
full  equivalent." 


CHAPTER  VI 

BONDS  AND  STOCKS 

A  THEORETICALLY  perfect  government, 
would,  in  its  simplest  economic  conception, 
be  so  conducted  that  its  regular  income,  from 
taxes  and  other  sources,  would  be  always  and 
exactly  sufficient  to  pay  all  its  necessary  expendi- 
tures; or,  in  other  words,  a  government  would  be 
in  a  financially  perfect  condition  if  it  could  be  at 
all  times,  entirely  free  from  debt,  and  without 
unnecessary  surplus  in  its  treasury. 

Nations  are,  unfortunately,  subject  at  all  times 
to  bad  and  injudicious  legislation  with  regard  to 
direct  taxation,  imposts,  tariffs,  internal  revenues, 
and  general  dealings  with  other  nations.  These 
agencies,  together  with  the  often  incompetent 
or  dishonest  characters  of  public  officials,  are 
imceasingly  at  work,  increasing  the  balances  upon 
the  wrong  sides  of  the  world's  accoimts  of  receipts 
and  expenditures.  In  addition  to  such  considera- 
tions, others,  by  far  more  formidable,  are  the  wars 
to  which  nations  must  be  liable,  and  the  prepara- 
tions for  war,  or  precautions  against  war,  which 
are  necessary  to  the  very  existence  of  nations. 

121 


122    The  American  Business  Woman 

To  provide  regularly,  by  direct  taxation,  for 
such  contingencies  would  evidently  be  the  means 
of  bringing  financial  ruin  to  almost  every  citizen 
and  to  almost  every  nation.  The  nations  of  the 
earth  are  therefore  compelled,  at  certain  times, 
to  borrow  immense  sums  of  money  in  order  to 
meet  these  extraordinary  expenses. 

In  a  similar  manner,  though  on  much  smaller 
scales,  and  indeed  with  much  less  of  good  reason, 
states,  cities,  counties,  and  even  villages  through- 
out the  civilized  world,  are  continually  compelled 
to  run  into  debt,  in  order  to  supply  the  numerous 
public  improvements  and  conveniences  which  the 
people  demand,  and  for  which  the  ordinary  taxes 
and  receipts  are  not  at  all  times  adequate. 

Bonds. — For  the  purpose  of  securing,  or  of 
appearing  to  secure,  the  repayment  of  the  loans 
which  are  made  necessary  by  the  expenses  which 
have  been  suggested,  nations,  states,  cities,  coun- 
tries, and  villages  commonly  issue  written  or 
printed  evidences  of  indebtedness,  called  bonds. 
These  bonds  are  solemn  obligations,  by  which 
the  borrowing  governments,  by  the  signatures 
and  attestations  of  their  properly  qualified  officers, 
promise  to  pay  the  amounts  stated  in  the  bonds 
at  certain  specified  times,  and  with  certain  specified 
yates  of  interest.  Attached  to  bonds  of  this 
description  are  commonly  series  of  coupons,  cor- 
responding to  the  regular  intended  payments  of 


Bonds  and  Stocks  123 

interest.  When  certain  interests  are  due  and  pay- 
able, the  corresponding  coupons  are  torn  from  the 
bonds,  by  the  bondholders,  and  deposited  in  the 
banks  for  collection,  or  are  otherwise  collected. 

By  reference  to  the  general  principles  of  invest- 
ment which  have  been  expounded  in  the  preceding 
chapter,  it  will  be  apparent  without  difficulty 
that  the  conditions  which  are  necessary  for  the 
safety  of  investments  will  not  be  fulfilled  by 
Government  or  municipal  bonds.  Such  bonds 
do  not  in  general  furnish  real  and  ample  securities 
for  the  funds  which  are  invested,  because  the 
actual  securities  are  nothing  more  than  the  good 
faith  and  credit  of  the  particular  geographical 
divisions  of  coimtry  by  which  the  bonds  are 
issued.  Moreover,  the  securities  are  not  within 
the  control  of  the  individual  investors,  since 
they  depend,  not  only  upon  the  action  of  the 
bondholders  generally,  but  also,  in  many  cases, 
upon  the  action  of  citizens  who  are  not  bondholders. 

In  the  application  of  these  principles,  however, 
a  clear  and  perfect  exception  must  be  made  in 
the  case  of  the  bonds  which  are  issued  by  the 
Government  of  the  United  States.  Such  an 
exception  must  be  consented  to  without  objection 
or  hesitation  because  (in  the  order  chosen  from 
a  standpoint  of  utility),  first,  we  are  compelled 
to  depend,  for  all  security,  not  only  of  property 
but  of  life  and  limb,  upon  the  laws  and  government 
of  our  coimtry,  and  therefore  we  can  find  no  better 


124    The  American  Business  Woman 

reliance  than  its  untarnished  faith  and  credit; 
and  second,  because  it  is  the  highest  duty  of  an 
American  citizen  to  offer  to  the  flag  of  our  country, 
and  to  all  that  it  represents,  a  loyal  and  an  uncal- 
culating  devotion. 

Many  of  our  States  have  uniformly  and  without 
delay  fulfilled  all  their  financial  obligations,  and 
many  cities  and  other  divisions  of  territory  have 
been  equally  successful  in  this  respect.  The  bonds 
of  such  States,  and  of  the  larger  cities,  which  have 
never  failed  to  meet  their  obligations,  are  con- 
sidered, not  only  by  business  men  generally,  but 
officially,  by  the  laws  of  the  different  States  to 
be  safe  investments;  and  the  moneyed  corpora- 
tions, which  affect  in  such  an  important  measure 
the  forttmes  of  the  people  are  allowed  to  invest 
in  them. 

The  bonds  of  coimties,  towns,  villages,  small 
cities,  and  school  districts,  at  least,  ought  to  be 
regarded  as  entirely  out  of  the  question  for  pur- 
poses of  investment;  and  if,  notwithstanding  the 
conclusions  which  have  been  stated,  it  shall  be 
decided  to  invest  in  State  bonds,  or  the  bonds  of 
the  larger  cities,  the  following  considerations  may 
not  well  be  neglected: 

The  past  financial  history  of  the  particular 
State  or  city  should  be  studied,  and  if  there  has 
been  any  wavering  or  deviation  from  prompt  and 
strict  methods  of  business,  or  any  tendency  in 
that  direction,  investments  should  be  made  else- 


Bonds  and  Stocks  125 

where.  In  many  of  the  States  the  allowable 
amounts  of  indebtedness  of  cities,  villages,  etc., 
are  limited  by  law  to  certain  proportions  of  the 
assessed  values  of  taxable  property,  while  in  other 
States  there  are  either  practically  no  such  restric- 
tions or  the  allowable  limits  are  placed  at  dan- 
gerously high  proportions.  The  former  class  of 
States  should  be  invariably  preferred  for  purposes 
of  investment  in  bonds. 

Another  important  consideration  is  the  amount 
of  indebtedness  to  which  the  particular  State  or 
city  is  already  actually  liable.  The  bonds  of 
States  and  cities  having  small  amounts  of  indebted- 
ness must  be  presumed  to  be  more  secure  than 
those  of  States  and  cities  which  are  burdened  with 
debts,  although  under  the  best  circumstances  it 
is  possible  that  future  legislation  may  so  bankrupt 
States  or  cities  that  their  bonds  may  turn  out  to 
be  worthless. 

Govemnient  bonds,  and  the  bonds  of  the  more 
prosperous  States,  are  considered  to  be  great 
conveniences  for  the  purposes  of  commercial 
business,  and  the  consequent  demand  for  them 
often  places  them  at  values  which  are  considerably 
above  the  par  values.  It  must  not  be  forgotten, 
however,  that  this  statement  holds  good  only  when 
the  bonds  in  question  have  considerable  time  to 
run  before  reaching  maturity;  for  it  is  evident, 
since  at  maturity  they  will  be  paid  or  redeemed 
at  their  par  values,  that  they  will  decline  to  their 


126    The  American  Business  Woman 

par  values  as  the  days  of  redemption  draw  near. 
The  rates  of  interest  which  are  paid  upon  first- 
class  bonds  of  this  description  are  comparatively 
low,  the  general  rule  that  rates  of  interest  vary 
directly  as  the  risks  which  must  be  incurred  being 
applicable  for  purposes  of  comparison  between 
different  bonds.  More  especially  will  this  fact 
prove  to  be  true  concerning  the  actual  rates  of 
interest  which  will  be  received  by  the  bondholders ; 
for  here  the  premiums  at  which  such  bonds  are 
sold  must  be  taken  into  consideration. 

Government  bonds  are  subject,  at  certain  times, 
to  fluctuations  in  the  market  values;  if,  therefore, 
the  normal  values  shall  be  known  and  assured  to 
the  satisfaction  of  investors,  and  the  bonds  shall 
be  purchased  when  there  are  slight  temporary  de- 
pressions, the  incomes  which  are  to  be  derived  from 
the  bonds  may  sometimes  be  increased  by  means 
of  the  profits  which  will  be  made  from  the  increases 
in  the  values.  Thus,  if  bonds,  paying  interest  at 
the  rate  of  four  per  cent.,  and  having  a  normal 
value  of  one  hundred  and  twenty,  shall,  by  reason 
of  a  temporary  depression,  be  purchased  at  the 
price  of  one  hundred  and  eighteen,  held  for  a  period 
of  one  year,  and  then  sold  at  the  normal  value,  the 
income  from  the  investment,  including  the  profit 
which  is  due  to  the  increase  in  values,  will  be 
slightly  greater  than  at  the  rate  of  five  per  cent. 

Notwithstanding  these  facts,  it  is  evident  that 
bonds   which   will   return   low  rates    of   interest 


Bonds  and  Stocks  127 

(and  no  others  apparently  can  be  safely  handled) 
will  in  general  scarcely  come  up  to  the  standard 
of  investments  which  shall  return  fair  and  regular 
incomes.  Government  bonds  may  therefore  be 
classed,  most  advantageously,  among  temporary 
investments  such  as  trust  companies  and  savings 
banks,  which  are  available  for  the  employment  of 
idle  money  while  awaiting  more  permanent  forms 
of  investment. 

Corporations. — The  gigantic  and  costly  enter- 
prises of  civilization  are  generally  such  as  to  be 
far  beyond  the  reach  and  control  of  single  individ- 
uals. And  this  indeed  is  well;  for  if  single  indi- 
viduals could  be  possessed  of  wealth  and  power 
sufficient  for  such  purposes,  the  influences  of  such 
individuals  for  evil  would  be  well-nigh  irresistible, 
and  monopolies,  in  the  worst  (and  proper)  sense 
of  the  word  would  be  established.  For  the 
purposes  of  such  enterprises  as  are  too  great  for 
the  single  individual,  it  has  long  been  the  practice 
of  men  to  unite  the  energies  and  means  of  many, 
and  thus,  by  aggregations  of  power,  accomplish 
tasks  which  would  be  otherwise  impossible.  Such 
combinations,  unrestrained,  have  long  been  con- 
sidered to  be  dangerous  to  the  general  welfare, 
among  other  reasons,  because  of  their  tendencies 
towards  restraints  of  trade  and  industry;  and 
therefore  they  have  been  declared  to  be  illegal, 
as  against  public  policy,  except  when  authorized 


128    The  American  Business  Woman 

and  regulated  by  laws  which  are  especially  enacted 
for  such  purposes.  And  so  it  has  been  said  that 
corporations  are  the  children  of  the  State. 

Thus  have  grown  up  the  corporations  which, 
under  the  control  of  the  laws,  are  so  numerous 
and  so  powerful  in  this  and  in  every  other 
enlightened  country. 

During  recent  years  there  has  also  appeared  a 
strong  tendency  to  consolidate  many  small  cor- 
porations or  companies  into  immense  single 
corporations,  which  are  commonly,  though  am- 
biguously, called  "trusts." 

The  formation  of  corporations  and  the  general 
principles  of  the  issuing  of  stocks  may  be  briefly 
illustrated  in  the  following  manner: 

Let  us  suppose  that  one  hundred  individuals 
shall  be  desirous  of  forming  a  corporation  for 
the  purposes  of  an  extensive  manufacturing  busi- 
ness, and  that  the  capital  stock  of  the  corpora- 
tion, actually  paid  in,  is  to  be  one  million  of 
dollars,  divided  into  shares  of  one  htmdred  dollars 
each,  and  equally  subscribed  for  by  the  one 
hundred  proposed  members.  The  requirements  of 
the  law  (which  generally  consist  of  filing  certain 
verified  statements  with  the  proper  State  officers) 
having  been  complied  with,  and  the  officers  of  the 
corporation  having  been  elected,  the  capital  is 
paid  in  by  the  several  members,  and  a  certificate, 
signed  and  attested  by  the  proper  officers,  to  the 
effect  that  the  individual  is  the  owner  of  one 


Bonds  and  Stocks  129 

hundred  shares,  of  the  value  of  one  hundred  dol- 
lars each,  in  the  capital  stock  of  the  corporation, 
is  given  to  each  of  the  subscribing  members.  The 
manufacturing  business  is  then  established  and 
carried  on  by  the  directors  and  officers  in  the 
usual  manner. 

Stocks. — Shares  of  stock  such  as  have  been 
described  are  called  "common  stock,"  and  entitle 
each  stockholder  to  a  pro  rata  voice  in  the  manage- 
ment of  the  business,  and  to  a  pro  rata  share  in 
the  profits  of  the  corporation,  which  at  certain 
periods  are  divided  among  the  shareholders  as 
dividends. 

A  certain  proportion  of  the  shares  of  stock  may 
be  issued  with  agreements  that  they  shall  take 
precedence  of  the  common  shares  in  the  matter  of 
dividends — that  is,  that  a  certain  dividend  be 
paid  upon  these  special  shares  before  any  shall 
be  paid  upon  the  common  shares.  Such  shares 
are  called  "preferred"  or  "guaranteed"  stock, 
and,  as  a  general  rule,  entitle  the  holders  to  no 
rights  or  privileges  beyond  those  of  the  holders 
of  the  common  stock,  except  the  preference 
which  has  been  mentioned.  In  a  similar  manner 
"interest-bearing"  stocks  or  shares  of  stock,  upon 
which  the  corporation  agrees  to  pay  regular  and 
specified  rates  of  interest,  may  be  issued. 

If,  now,  we  suppose  that  the  business  of  the 
corporation   shall   have   been   so   well  managed 


130    The  American  Business  Woman 

that  the  net  annual  profits  shall  amount  to  the 
sum  of  one  hundred  thousand  dollars,  the  share- 
holders will  receive  dividends  at  the  rate  of  ten 
per  cent,  per  anntim  on  their  shares  of  stock,  and 
the  shares  will  be  considered  to  be  such  profitable 
investments  that  they  may  be  sold  at  a  con- 
siderable premium,  or  excess  over  the  par  value. 
But  suppose,  on  the  other  hand,  that  very  little 
or  no  net  profit  shall  be  earned  by  the  corporation 
in  question.  The  market  value  of  the  shares  of 
stock  will  evidently  fall  below  the  par  value,  and 
the  shareholders  will  suffer  losses.  If  the  business 
shall  continue  to  be  profitless,  or  even  worse, 
failure  must  result,  and  the  shareholders  may 
lose  all  that  they  have  invested. 

Let  us  suppose,  further,  that  among  the  one 
himdred  shareholders  there  shall  be  one  man  of 
exceptional  shrewdness  and  ability,  who,  un- 
hindered, would  be  able  to  carry  the  corporation 
out  of  its  difficulties  and  into  successful  methods 
of  business.  It  is  obvious  that  his  voice  in  the 
management  of  the  business,  against  that  of  the 
ninety-nine  other  shareholders,  will  be  powerless; 
he  will  therefore  be  compelled  to  meet  his  loss 
with  the  others. 

Certain  corporations,  principally  railroad  and 
other  transportation  companies,  are  authorized 
by  law  to  borrowmoney  for  necessary  expenditures, 
and  to  issue  therefor  bonds  which  are  secured 
by  mortgages  upon  the  properties  of  the  corpora- 


J 


Bonds  and  Stocks  131 

tions.  Such  mortgages  are  usually  made  to 
certain  persons  or  institutions  as  trustees  for  the 
bondholders,  and  in  case  of  default  in  the  payment 
of  principals  or  interest,  the  trustees  are  gen- 
erally empowered  to  take  possession  of  and  to 
sell  the  properties  of  the  corporations  which  are 
covered  by  the  mortgages  for  the  benefit  of  the 
bondholders.. 

A  brief  glance  at  the  rules  by  means  of  which  we 
are  enabled  to  determine  the  safety  of  investments 
will  be  sufficient  to  show  that  the  stocks  of  cor- 
porations will  in  general  fall  so  far  short  of  the 
requirements  that  they  ought,  perhaps,  not  even 
to  be  included  in  the  lists  of  possible  investments. 
In  a  large  nimiber  of  cases  the  securities  are 
fictitious,  and  practically  impossible  of  determina- 
tion by  the  single  shareholder;  the  securities  are 
entirely  beyond  the  control  of  the  individual 
stockholder;  the  management  of  the  business, 
which  vitally  affects  the  security  and  the  returns 
is  beyond  the  control  of  the  single  investor;  and 
the  income  itself  is  practically  an  unknown  quan- 
tity. Indeed,  what  is  commonly  called  investing 
in  stocks,  is  according  to  all  the  proper  rules  for 
the  safe  guidance  of  investors,  merely  a  speculating 
in  which  the  speculator  appears  to  be  helpless  in 
the  hands  of  manipulators. 

There  are  many  different  kinds  of  stocks, 
varying  all  the  way  from  the  stocks  of  old  and 
substantial  financial  institutions,  which,  year  after 


132    The  American  Business  Woman 

year,  have  paid  to  their  shareholders  handsome 
dividends,  to  those  of  far-off  gold  mines  or  silver 
mines,  which  may  in  fact  exist  only  in  the  minds 
of  the  gullible  shareholders.  So  also  there  are 
special  circumstances  under  which  shrewd  and 
experienced  men  of  business  may,  with  compara- 
tive safety,  own  stocks:  as  where  they  shall  own 
controlling  interests  in  the  capital  stocks  of 
particular  corporations,  or  are  officers  of  the 
corporations,  and  are  thus  able  to  control  the 
management.  But  the  purposes  of  this  volume 
will  not  admit  of  discriminations  in  this  respect. 
It  is  necessary  rather  to  establish  rules  which 
will,  to  the  greatest  possible  extent,  avoid  the 
necessity  for  close  discrimination,  for  which 
process  only  a  fortimate  few  are  in  all  respects 
competent.  The  conclusion  must  therefore  be 
that  all  kinds  of  stocks,  without  exception,  are  to 
be  regarded  as  dangerous,  and  are  to  be  avoided 
always  and  entirely. 

With  regard  to  railroad  bonds,  which  are  at 
least  nominally  secured  by  mortgages,  and  upon 
which  regular  rates  of  interest  are  promised,  it 
may  be  said  that,  in  theory,  if  not  always  in  prac- 
tice, they  are  far  less  dangerous  than  stocks.  The 
remedy  of  foreclosure  and  sale  is  better  than  no 
remedy,  even  though  the  securities  when  finally 
determined,  shall  prove  to  be  inadequate.  So  the 
intention  and  the  promise  to  pay  regular  interest 
go  in  the  right  direction  towards  proper  invest- 


Bonds  and  Stocks  133 

ments.  But  the  objections  that  the  actual  amounts 
of  securities  cannot  be  ascertained,  and  that  the 
securities  are  not  within  the  control  of  investors, 
are,  nevertheless,  insurmountable.  Tersely  put, 
the  character  of  such  bonds  may  be  expressed  in 
this  manner:  If  the  profits  shall  be  sufficient 
the  interest  and  principals  will  be  paid;  otherwise 
probably  not.  The  safe  rule  cannot  be  mistaken; 
it  is  to  take  no  such  chances,  but  rather  to  place 
our  means  in  the  surer  investments  which  will  be 
fully  explained  in  the  succeeding  pages  of  this 
voltune. 

Investment  Corporations. — There  is  a  gen- 
eral class  of  investment  corporations,  which  is  of 
comparatively  recent  origin,  and  which,  because 
of  the  apparent  feasibility  of  the  claims  of  such 
corporations,  and  the  widespread  damage  and 
loss  of  which  such  corporations  have  been  the 
means,  is  deserving  of  special  though  by  no  means 
of  flattering  mention. 

These  organizations,  acting  frequently  under 
imposing  and  grandiloquent  names,  and  protected 
in  some  of  the  States  by  laws,  or  adjudications 
which  ought  not  to  exist,  vary  considerably  in  the 
details  of  management.  The  general  principles 
of  this  class  of  corporations,  may,  however,  be 
described  as  follows : 

The  various  investors  place  their  money  in  the 
hands  of  the  particular  corporation  with  the  tinder- 


134    The  American  Business  Woman 

standing  and  solemn  agreement  that  the  funds  are 
to  be  loaned  upon  first-class  real-estate  mortgages 
only,  not  in  sums  corresponding  to  the  particular 
amounts  which  are  subscribed  by  the  different 
investors,  but  in  such  lump  sums  as  may  be  most 
advantageous.  The  different  investors,  therefore, 
cannot  receive  the  actual  mortgages  as  evidences 
of  security  for  their  money,  but  receive  instead 
shares  of  stock  or  bonds  issued  by  the  corporation, 
and  upon  which  the  corporation  agrees  to  pay 
rates  of  interest  which  are  considerably  higher 
than  are  consistent  with  real  safety.  In  many 
cases  the  funds  are  loaned  upon  farm-lands  in 
far-away  States,  and  for  this  reason  alone,  though 
the  affairs  of  such  a  corporation  may  be  carried 
on  with  fair  discretion  and  with  absolute  honesty, 
the  chances  will  be  largely  in  favor  of  loss  and 
failure.  And  when  the  opportunities  for  rascality, 
which  such  methods  will  not  fail  to  offer,  shall  be 
taken  into  consideration,  the  large  amounts  of 
money  which  corporations  of  this  kind  have  been 
able  to  obtain  (and  often,  as  far  as  the  investors 
are  concerned,  to  lose)  will  indeed  be  surprising. 
An  application,  however  cursory,  of  the  rules 
which  have  been  explained  will  at  once  condemn 
this  entire  class  of  corporations  as  extremely 
dangerous.  Indeed,  ordinary  intelligence  ought 
to  suggest  that  such  corporations  are  often  origin- 
ally dishonest.  But  the  persuasive  powers  of  the 
talented  promoters  of  such  enterprises  have  often 


Bonds  and  Stocks  135 

availed  for  the  subjugation  of  reason.  Investors 
have  been  informed  that  in  this  way  only  can  small 
amounts  be  loaned  with  perfect  safety  and  with 
high  rates  of  interest ;  that  such  large  corporations 
have  exceptional  facilities  for  obtaining  good  loans 
and  for  properly  estimating  the  qualities  of 
securities;  that  the  officers  and  managers  of  the 
corporations  are  men  of  large  means  and  experience 
who  are  themselves  heavily  interested  in  the  cor- 
porations; and  that  the  shares  of  stock  or  bonds 
are  merely  forms  which  are  necessitated  by  the 
characters  of  the  corporations,  while  the  actual 
effect  of  the  arrangements  is  to  make  the  investors 
not  speculators  in  the  stock  of  the  corporations, 
but  bona  fide  holders  of  first-class  mortgages. 
And  so,  many  persons,  forgetting  the  plain  facts 
that  mortgages  over  which  the  mortgagees  have 
no  control  are  mortgages  only  in  name,  and  that 
actual  evidences  of  the  investment  of  funds  in  the 
manners  which  are  promised  are  indeed  difficult  to 
obtain,  have  suffered  ruinous  losses,  only  to  enrich 
the  ingenious  and  unprincipled  managers  of  these 
loan-corporations. 

Other  forms  of  corporations  claiming  to  ac- 
complish the  purposes  of  investments  are  to  be 
found,  and  it  cannot  be  doubted  that  future  years 
will  bring  forth  still  others  which  will  develop 
methods  and  principles  which  will  then  appear  to 
be  novel  and  practicable.  But  it  will  invariably 
appear,  only  the  more  conclusively  by  the  careful 


136    The  American  Business  Woman 

examination  of  special  cases,  that  the  faithful 
employment  of  the  simple  and  convenient  rules  by 
which  the  safety  of  investments  is  to  be  deter- 
mined will  safely  guide  investors  around  the  pit- 
falls which  will  always  beset  their  ways,  and  into 
the  comparative  serenity  which  may  thus  happily 
be  attained. 


CHAPTER  VII 

MORTGAGES 

THE  word  "mortgage"  signifies  a  dead  pledge , 
the  name  being  derived  from  the  fact  that 
the  mortgagor  holds  possession  of  the  mortgaged 
land,  while  in  the  vivum  vadium^  or  living  pledge 
of  former  times,  the  mortgagee  held  possession  of 
the  land  and  applied  the  rents  and  profits  to  the 
payment  of  the  debt. 

A  mortgage  is  a  lien  upon  real  estate  which  is 
given  to  secure  the  payment  of  a  debt,  usually 
money.  It  is,  in  form,  an  absolute  conveyance 
of  the  land  by  the  debtor  (the  mortgagor)  to  the 
creditor  (the  mortgagee)  with  an  agreement  to 
the  effect  that,  if  the  borrowed  money  shall  be 
repaid  according  to  the  terms  which  are  specified, 
and  if  certain  other  agreements  shall  be  fulfilled, 
the  conveyance  shall  be  void,  otherwise  to  be  in 
full  force  and  effect. 

Strictly  speaking,  the  legal  effect  of  such  an 
agreement  will  be  to  forfeit  all  claims  of  the  mort- 
gagor upon  the  mortgaged  land  as  soon  as  any 
default  shall  be  made  by  the  mortgagor;  or,  in 
other  words,  the  slightest  failure  on  the  part  of 

137 


138    The  American  Business  Woman 

the  mortgagor  to  perform  his  agreements  will 
deprive  him  of  his  land  and  give  it  outright  to 
the  mortgagee.  And  such,  in  fact,  was  formerly 
the  law.  But  the  courts,  recognizing  the  great 
severity  of  the  law  in  this  respect,  gradually  over- 
came it,  and  finally  decreed  that  the  mortgagor 
shall  have  the  right  to  redeem  the  mortgaged 
land,  by  the  payment  of  the  borrowed  money  and 
the  necessary  expenses,  at  any  time  after  default, 
until  such  right  of  redemption  shall  have  been  cut 
off  by  regular  process  of  law.  This  right  to  redeem 
the  land  after  default  has  been  made  is  called  the 
mortgagor's  equity  of  redemption,  and  the  pro- 
ceeding, on  the  part  of  the  mortgagee,  which 
finally  destroys  the  equity  of  redemption  is  called 
the  foreclosure  of  the  equity  of  redemption,  or 
simply  foreclosure. 

For  all  practical  purposes,  then,  a  mortgage 
may  be  described  as  an  agreement  between  a 
debtor  and  a  creditor,  to  the  effect  that  the  debtor 
will  repay  the  borrowed  money  at  a  certain  time, 
with  interest  at  a  certain  rate,  and  that,  in  case 
of  his  failure  so  to  do,  the  mortgagee  may,  by 
process  of  law,  sell  a  certain  designated  piece  of 
land  and,  out  of  the  proceeds,  repay  the  debt  with 
the  interest  which  has  been  agreed  upon,  and  the 
expenses  of  the  proceeding. 

It  will  be  observed  that  two  principal  elements 
are  present  in  the  transaction  of  mortgaging  a 
piece  of  land ;  first  the  debt,  which  is  the  foundation 


Mortgages  139 

of  the  transaction,  and  second  the  lien  upon  the 
land  which  is  created  for  the  purpose  of  securing 
the  debt.  The  lien  upon  the  land  is  created  by 
the  mortgage  deed  (commonly  called  simply  the 
mortgage)  which  is  placed  upon  record  in 
the  county  where  the  land  is  situated,  as  a  notice  to 
the  public,  and  the  debt  is  created  by  the  delivery 
of  the  borrowed  money  to  the  debtor.  For  the 
purpose  of  evidencing  the  debt,  however,  the 
debtor  executes  and  delivers  to  the  creditor  a 
bond,  which  is  a  legal  and  binding  acknowledg- 
ment of  the  debt,  and  a  promise  to  repay  the  same 
with  interest.  Thus  the  transaction  has  come  to 
be  termed  an  investment  in  bond  and  mortgage. 

In  some  States  the  evidence  of  the  debt  accom- 
panying the  mortgage  is  a  promissory  note  in- 
stead of  the  more  solemn  bond,  but  the  effect  is 
practically  the  same  in  either  case. 

Equities. — In  all  cases  there  is,  or  at  least  is 
presumed  to  be,  a  margin  or  an  excess  in  the  value 
of  the  mortgaged  land  over  and  above  the  amount 
which  is  secured  by  the  mortgage;  this  margin  or 
excess  of  value  is  termed,  rather  ambiguously, 
the  mortgagor's  equity  in  the  land. 

The  equity,  notwithstanding  the  absolute  form 
of  the  mortgage,  still  belongs  to  the  mortgagor, 
and  may  itself  be  mortgaged.  So  there  may  be 
any  number  of  mortgages  upon  a  piece  of  land, 
termed  the  first  mortgage,  the  second  mortgage, 


140    The  American  Business  Woman 

the  third  mortgage,  and  so  on,  each  having  its 
accompanying  bond,  and  each,  after  the  first, 
attaching  to  whatever  of  equity  remains  over  and 
above  the  amounts  of  the  prior  mortgages. 

It  may  be  surmised  from  these  statements,  no 
less  than  from  a  general  conception  of  the  principles 
of  equity,  that  a  mortgage  will  take  precedence  of 
only  such  liens  as  may  be  put  upon  the  mortgaged 
premises  after  the  lien  of  the  mortgage  has  at- 
tached; or  in  other  words,  the  prior  lien,  in  point 
of  time  will  take  precedence  over  all  subsequent 
liens,  excepting  only  such  public  liens  as  by  law 
cannot  be  interfered  with,  such  as  taxes  and  assess- 
ments. And  so,  if  a  judgment,  which  is  a  lien 
upon  real  estate,  shall  exist  against  a  mortgagor 
at  the  time  of  recording  a  mortgage  against  his 
real  estate,  the  lien  of  the  judgment  will  take 
precedence  of  the  mortgage,  and  the  judgment- 
creditor  may,  by  process  of  law,  sell  the  mortgaged 
premises  to  satisfy  his  lien,  without  regard  to  the 
mortgage. 

There  is,  however,  one  somewhat  remarkable 
exception  to  this  general  rule,  which  arises  in  the 
case  where  a  purchaser  of  real  estate  shall  give  back 
to  the  vendor,  at  the  time  of  the  execution  of  the 
deed,  a  mortgage  to  secure  a  part  of  the  purchase- 
price  of  the  real  estate.  Such  a  mortgage  is 
called  a  purchase-money  mortgage,  and  takes 
precedence  of  judgments  which  may  exist  against 
the  mortgagor  at  the  time.    The  theory  upon 


Mortgages  141 

which  the  principle  of  the  purchase-money  mort- 
gage is  founded  is,  that  the  deed  and  the  mortgage 
are  simultaneous  in  point  of  time,  and  that  there- 
fore there  is  no  period  of  time  existing  between 
them  during  which  judgments  can  attach. 

For  these  reasons,  although  the  existence  of 
judgments  and  such  liens  should  be  fully  deter- 
mined by  examinations  of  titles,  purchase-money 
mortgages  may  be  considered  as  possessing 
advantages  over  mortgages  of  the  ordinary 
description. 

Safety  of  Mortgages. — If  we  presume  a 
perfect  mortgage,  or,  otherwise  expressed,  if  we 
assume  that  all  the  conditions  upon  which  the 
quality  of  the  mortgage  depends  shall  be  the 
best  possible  for  such  a  form  of  investment,  we 
shall  discover  that  the  most  rigorous  and  search- 
ing application  of  the  general  rules  of  investment 
will  fail  to  disclose  any  serious  objection  to  it. 
Such  a  mortgage  will  be  in  all  respects  a  perfectly 
safe  investment,  because,  first,  there  will  be  a 
real  and  ample  security  of  the  best  character; 
and,  second,  the  security  will  be  perfectly  within 
the  control  of  the  investor,  for  the  investor  alone 
can  foreclose  the  mortgage  at  any  time  after  a 
default  shall  have  been  made.  The  returns  from 
such  an  investment  will  be  fair  and  regular  because 
of  the  agreement,  supported  by  the  penalty;  and 
sure,  because  if,  by  any  chance,  the  mortgagor 


142    The  American  Business  Woman 

shall  fail  to  pay  them,  the  ample  security  will  not. 
In  addition  to  these  qualities,  it  may  be  said  that 
a  mortgage  is  a  true  loan-investment,  having  all 
the  attributes  of  an  investment  and  none  of  the 
attributes  of  a  speculation.  It  costs  the  investor 
practically  nothing,  all  expenses  being  paid  by 
the  mortgagor;  and  comparatively  little  time  and 
effort  will  be  required  to  keep  the  investor  at  all 
times  informed  as  to  the  condition  of  the  invest- 
ment in  all  important  respects. 

A  perfect  mortgage  is,  then,  a  perfect  loan- 
investment.  But  a  method,  ever  so  perfect  in 
itself,  may  be  rendered  imperfect  by  neglecting 
the  considerations  which  are  necessary  to  make 
it  perfect,  or  by  misapplications  of  the  exact 
principles  which  are  involved.  So,  mortgages 
may  be  as  nearly  perfect  as  investments  can  be 
made,  they  may  involve  considerable  risks  and 
considerable  difficulties,  or  they  may  be  of  such 
characters  as  to  cause  certain  losses  of  interest  and 
of  considerable  portions,  if  not  all,  of  the  principals, 
according  as  are  applied  the  principles  which  have 
been  explained  in  a  general  manner,  and  which 
will  now  receive  a  particular  consideration  in 
connection  with  the  subject  which  is  at  present 
under  discussion. 

As  we  have  seen  to  be  the  case  with  all  kinds  of 
investments  in  general,  the  two  great  considera- 
tions affecting  mortgages  are  that  they  shall  be,  as 
nearly  as  possible,  absolutely  safe,  and  that  they 


Mortgages  143 

shall  return  fair  and  regular  incomes.  With  regard 
to  the  latter  of  these  considerations,  mortgagees 
have  but  to  agree  with  mortgagors  concerning  the 
rates  of  interest  and  the  times  and  manners  of 
payment,  and  to  include  such  agreements  properly 
in  the  written  instruments,  and  the  considerations 
which  will  go  to  secure  the  payment  of  the  princi- 
pals will,  at  the  same  time,  provide  securities  for 
the  proper  and  regular  payment  of  the  interest. 

The  safety  of  mortgagees  will  depend  upon 
many  particular  conditions,  all  of  which  may  be 
included  in  two  general  requisites,  namely:  the 
securities  must  be  in  all  respects  good  and  sufficient, 
and  the  requirements  and  precautions  of  the  law 
must  be  carefully  complied  with. 

Proceeding  now  to  investigate  the  conditions 
which  go  to  make  up  the  first  general  requisite, 
we  shall  find  the  first  to  be  that  the  title  of  the 
mortgagor  to  the  security  (the  land)  must  be 
perfect.  To  this  end,  the  whole  title  to  the  mort- 
gaged premises  must  be  in  the  mortgagor;  that 
is,  the  mortgage  must  cover  the  whole  title,  not 
a  half-interest  or  an  undivided  interest  of  any 
kind ;  for  it  is  evident  that  if  money  shall  be  loaned 
on  a  part  interest  in  certain  land,  and  the  mort- 
gagee shall  be  compelled  finally  to  foreclose  the 
mortgage  and  to  buy  in  the  premises,  the  mort- 
gagee will  then  be  in  the  position  of  a  part  owner 
with  the  remaining  owners,  and  the  control  of  the 
security  will  be  only  partial. 


144    The  American  Business  Woman 

The  mortgagor's  ownership  of  the  land  must  be 
absolute.  That  is,  he  must  own  the  land  in  fee- 
simple;  for  a  mortgage  upon  an  estate  for  life,  a 
leasehold  or  other  conditional  or  uncertain  owner- 
ship, will  necessarily  be  a  poor  investment,  the  real 
security  (the  land  itself)  being  beyond  the  control 
of  the  investor. 

In  order  that  the  mortgagor's  title  to  the 
mortgaged  land  shall  be  perfect,  the  land  must  be 
free  and  clear  of  all  liens,  incumbrances,  and 
claims;  or,  which  is  equivalent,  the  mortgage  must 
be  a  lien  which  is  prior  to  all  others  upon  the  land. 
This  rule  will  have  the  effect  of  precluding  all 
except  first  mortgages  from  the  consideration  of 
investors,  and  an  investigation  of  the  character 
of  second  and  other  subsequent  mortgages,  as  a 
class,  will  prove,  independently  of  the  general 
rules,  the  practical  value  of  such  a  result.  As  has 
been  explained,  a  second  mortgage  attaches  merely 
to  the  equity  in  the  land,  which  may  remain  over 
and  above  the  first  mortgage.  If,  therefore,  the 
first  mortgagee  shall  foreclose  the  first  mortgage, 
the  second  mortgagee,  receiving  notice  of  the 
foreclosure,  must  see  to  it  that  the  land,  at  forced 
sale  and  possibly  at  a  disadvantageous  time,  shall 
bring  a  price  which  shall  be  high  enough  to  pay 
both  mortgages;  otherwise  the  second  mortgage 
will  be  cut  off  and  partly  or  entirely  lost.  And 
similarly,  if  it  shall  become  necessary  for  a  second 
mortgagee  to  foreclose  her  mortgage,  she  must  be 


Mortgages  145 

prepared  to  buy  in  the  land  and  to  pay  the  amount 
of  the  first  mortgage  in  cash;  else  her  second 
mortgage  will  probably  realize  nothing. 

Many  other  incumbrances  and  imperfections  of 
title  may  exist  which  may  seriously  injure  or 
entirely  destroy  the  value  of  mortgages  as  safe 
investments;  but  these,  and,  in  fact,  all  the  cir- 
cumstances and  conditions  which  may  affect  titles, 
can  be  discovered  only  by  the  lawyers  and  expert 
searchers,  who  ought  in  all  cases  to  be  employed 
for  the  thorough  examinations  of  titles^  No  less 
care  should  be  taken  in  the  examination  of  titles 
to  the  securities  upon  which  loans  are  to  be  made 
than  if  it  were  proposed  to  purchase  the  lands 
outright;  for  the  only  safe  theory  upon  which  in- 
vestments in  mortgages  can  be  made,  is  that  the 
mortgagees  will  eventually  be  compelled  to  fore- 
close their  mortgages,  and  thus  finally  become  the 
absolute  owners  of  the  mortgaged  lands.  In 
some  cases  the  amoimts  of  mortgages  may  be  so 
small  that  the  expenses  of  examining  the  titles 
to  the  lands  may  be  regarded  as  hardships  which 
it  will  be  imnecessary  to  put  upon  the  mortgagors. 
Such  cases  should,  in  fact,  never  exist ;  for  if  a  loan 
shall  be  so  small  as  not  to  require  proper  precau- 
tions, the  formality  of  a  bond  and  mortgage  may 
be  regarded  as  absurd.  The  favor  of  a  small  loan 
should  be  refused,  or  it  should  be  generously 
accorded  without  other  security  than  the  promise 
of  the  borrower  to  return  it. 


146    The  American  Business  Woman 

A  second  condition  which  is  essential  to  the 
safety  of  mortgages  is  that  the  securities  shall 
have  ample  actual  values;  and  in  this  respect 
actual  values  must  be  understood  to  signify  values 
which  may  be  quickly,  and  at  any  time,  realized 
from  the  securities.  This  matter  has  been  dis- 
cussed in  a  general  manner  at  considerable  length 
in  a  previous  chapter  of  this  work ;  it  now  becomes 
necessary  to  examine  in  detail  the  various  facts 
and  circumstances  which  may  affect  the  values  of 
securities  in  the  particular  case  of  mortgages  upon 
real  estate. 

The  first  inquiry  in  the  line  of  this  examination 
must  be  concerning  the  laws  which  govern  mort- 
gages, or  the  laws  of  the  particular  States  in 
which  proposed  investments  in  mortgages  are  to 
be  made;  for,  be  the  cash  value  of  mortgaged 
lands  ever  so  great,  the  lands  will  be  a  worthless 
security  if  the  laws  shall  be  such  that  mortgagees 
cannot  foreclose  their  mortgages  if  such  action 
shall  at  any  time  become  necessary. 

The  laws  of  the  different  States  affecting  mort- 
gages are  so  various,  and  at  the  same  time  depen- 
dent to  such  an  extent  upon  the  changing  moods  of 
the  legislatures,  that  it  has  not  been  considered 
advisable  to  refer  to  them  specifically  here.  In  the 
chapter  which  is  devoted  to  the  discussion  of  the 
general  principles  of  investment,  reference  has 
been  made  to  the  fact  that  in  certain  States  there 
is  a  tendency  to  discriminate  against  non-resident 


Mortgages  147 

investors,  and  that  laws  have  been  enacted  proba- 
bly for  the  distinct  purpose  of  interfering  with 
the  remedies  of  investors  after  the  investments 
have  been  made.  With  regard  to  mortgages,  such 
laws  may  be  described  generally  in  the  following 
manner:  They  may  give  to  mortgagors  the  right 
to  redeem  mortgaged  lands  for  considerable  times 
— one  or  two  years — after  the  mortgages  shall  have 
been  foreclosed,  thus  making  lands  in  the  hands  of 
mortgagees  unsalable  and  useless  for  the  time 
being  at  least.  In  some  cases  mortgagors  are 
permitted  to  retain  actual  possession  of  lands 
during  the  periods  which  have  been  referred  to, 
and  the  results  in  many  cases  will  be  that,  when 
investors  shall  finally  come  into  the  possession  of 
their  securities,  the  securities  will  be  found  to  be 
reduced  to  states  of  extreme  dilapidation,  which  no 
amount  of  caution  on  the  parts  of  investors  will 
be  able  to  prevent.  Such  iniquitous  laws  appear 
indeed  to  be  deliberate  challenges  to  the  base  and 
revengeful  tendencies  of  dishonest  debtors,  and 
should  meet  with  nothing  but  outspoken  condem- 
nation from  all  good  citizens. 

Probably  to  a  greater  extent  than  in  any  other 
form  of  loan-investment,  the  safety  of  mortgages 
is  affected  by  the  general  rule  that  the  rate  of 
interest  which  shall  be  received  will  be  directly 
proportional  to  the  risks  which  must  be  in- 
curred. And  the  reasons  which  sustain  the  rule 
are   especially   clear   in   the   case   of   mortgages. 


148    The  American  Business  Woman 

First-class  mortgages  on  real  estate  being  almost 
imiversally  considered  as  among  the  best  pos- 
sible forms  of  investment,  there  is  very  seldom 
any  lack  of  money  awaiting  such  investments. 
The  supply  often  exceeds  the  demand,  and  the 
result  of  such  conditions  is,  as  always,  to  decrease 
prices,  or,  in  the  case  of  mortgages,  to  lower  the 
rates  of  interest.  The  actual  values  of  real  estate 
in  various  localities  are  not  difficult  to  ascertain, 
and  are  therefore  comparatively  well  known  to 
investors  generally.  Hence,  just  in  proportion  as 
relative  securities  shall  become  poorer,  the  gross 
amount  of  money  which  is  available  will  become 
less.  In  other  words,  just  in  proportion  as  securi- 
ties shall  become  poor,  the  demand  will  exceed  the 
supply  of  money,  and  the  price  of  money— the 
interest  which  must  be  paid  for  the  use  of  it — will 
increase.  There  is  naturally  a  much  larger  num- 
ber of  applications  for  money  to  be  borrowed  upon 
poor  securities  than  of  opportunities  for  really 
first-class  loans;  because  in  the  majority  of  cases 
those  who  wish  to  borrow  money  do  not  own  first- 
class  real  estate,  and,  vice  versd,  those  who  own 
first-class  real  estate  do  not  wish  to  borrow  money. 
And  in  addition  to  such  natural  conditions  is  the 
fact  that  there  are  many  shrewd  and  dishonest  per- 
sons who  undertake,  quite  often  successftilly,  to 
borrow  on  mortgages  such  large  amounts  that 
they  can  allow  the  mortgagees  to  foreclose  their 
mortgages  and  still  retire  from  the  transactions 


Mortgages  149 

with  profits,  and  to  the  eventual  losses  of  the 
mortgagees. 

Builders*  Loans. — So-called  "builders*  loans," 
and  mortgages  which  are  made  to  secure  future 
advances,  are  largely  responsible  for  results  of 
this  description.  They  are  generally  made  in  the 
following  manner:  A  person  claiming  to  own 
valuable  imimproved  real  estate  free  and  clear 
may  desire  to  improve  the  real  estate  by  the  erec- 
tion of  buildings  of  certain  descriptions,  and  to 
borrow  the  money  which  is  necessary  for  the 
erection  of  the  buildings  upon  the  security  of  a 
mortgage,  at  a  high  rate  of  interest  and  covering 
both  land  and  buildings.  To  this  end,  the  mort- 
gage is  at  once  made  and  recorded,  with  an 
agreement  that  the  mortgagee  shall  advance  to 
the  btiilder  certain  amounts  of  money  at  certain 
stages  in  the  erection  of  the  buildings.  If,  now, 
the  builder  shall  be  dishonest,  he  will  attempt,  by 
every  possible  means  which  is  known  to  such 
tricksters,  to  hold  back  the  payment  of  all  bills 
which  are  due  for  work  done  upon  the  buildings, 
and,  at  the  same  time,  to  receive  as  much  money 
as  is  possible  frorn  the  mortgagee.  Just  as  soon 
as  these  conditions  shall  have  reached  the  maxima, 
and  the  builder  may  make  a  profit  by  so  doing,  he 
will  throw  up  the  whole  contract,  and  leave  the 
astonished  mortgagee  to  foreclose  her  mortgage 
and  to  find  herself  finally  possessed  of  a  half-* 


ISO    The  American  Business  Woman 

finished,  and  badly  constructed  building,  which  is 
almost  buried  beneath  the  liens  of  contractors, 
mechanics,  and  material-men. 

Locality. — The  actual  values  of  the  lands 
which  form  the  securities  for  mortgage  invest- 
ments will  depend  directly  upon  the  localities  in 
which  they  shall  be  situated,  upon  the  purposes 
for  which  they  shall  be  used  and  intended,  and 
upon  the  characters  and  kinds  of  buildings  and 
other  improvements  which  shall  be  erected  upon 
them.  With  regard  to  the  question  of  locality 
it  may  be  remarked  that  large  cities,  which  are 
established  as  industrial  centres,  and  in  which  the 
populations,  as  well  as  the  number  and  extent  of 
industries,  are  steadily  increasing,  will  prove  to  be 
the  most  advantageous;  while  farming  districts 
and  small  villages  which  are  situated  at  consider- 
able distances  from  large  cities  will  furnish  the 
poorest  of  all  mortgage-investments.  In  the  one 
case,  real  estate  values  must  increase  steadily  in 
the  main;  in  the  other,  experience  has  indicated 
beyond  doubt  that  the  general  tendency  of  lands 
will  be  to  decline  in  values  for  many  years  to  come. 
Also  the  fluctuations  in  values  will  be  less  in 
large  cities  than  in  rural  districts,  and  in  the 
former  it  will  be  by  no  means  as  difficult  to  find 
ready  cash  purchasers  of  real  estate  in  times  of 
depression. 

An  exceedingly  dangerous  practice  is  the  in- 


Mortgages  151 

vesting  of  money  in  mortgages  upon  distant 
timber  lands  and  mineral  lands.  The  danger  in 
the  former  kind  of  securities  lies  in  the  facts  that 
destructive  fires  are  frequent  occurrences  in 
heavily  wooded  sections,  and  that  the  values  of 
such  lands,  after  the  timber  shall  have  been 
removed  or  destroyed,  will  be  exceedingly  small. 
It  is  also  possible  that  timber- thieves  may  steal 
enough  valuable  timber  from  imguarded  lands  to 
take  away  materially  from  the  value  of  the  land. 
So-called  mineral  lands  may  be  very  valuable 
property,  or  they  may  be  entirely  valueless,  and 
none  but  experts  will  be  able  correctly  to  deter- 
mine such  values.  Consequently  the  opportuni- 
ties for  fraud  which  are  offered  by  this  kind  of 
real  estate  are  exceptional.  Many  a  mortgagee 
of  supposed  rich  iron-lands,  or  lands  abounding 
in  more  precious  metals,  has  found  at  last  that 
the  valuable  metals  existed  only  in  the  representa- 
tions of  the  promoters,  and  that  the  security  for 
the  mortgage  is  actually  worthless.  But  the  rules 
of  investment,  which  have  already  been  deduced 
and  explained  in  this  chapter,  and  in  the  chapter 
on  the  general  principles  of  investment,  will  be 
found  sufficient,  if  properly  applied,  to  prevent 
the  possibility  of  this  particular  kind  of  disaster, 
no  less  than  of  others  of  equally  serious  natures. 

Improved  and  Unimproved  Real  Estate.— 
As  a  rule,  applicable  to  the  large  majority  of  cases, 


152    The  American  Business  Woman 

it  may  be  stated  that  improved  real  estate  will 
prove  to  be  a  better  security  than  that  which  is 
unimproved.  And  the  most  practical  reason  for 
the  statement  is  that  improved  real  estate,  is, 
in  a  measure  at  least,  self-supporting,  that  is,  its 
rents  and  profits  will  pay,  at  the  best  entirely  and 
at  the  worst  partially,  taxes,  interest,  and  other 
necessary  expenses;  while  imimproved  real  estate 
is  generally,  in  this  respect,  a  dead  weight  upon 
the  owner.  Real  estate  which  is  judiciously 
improved  will  return  to  the  owner  a  fair  income 
over  and  above  all  necessary  expenses,  and  it  is 
plain  that  the  more  profitable  a  building  may  be 
to  the  owner,  the  better  will  be  the  security  of  the 
mortgage. 

The  comparative  values  of  similar  kinds  of  real 
estate,  having  reference  both  to  the  locations  and 
to  the  kinds  of  improvements,  in  different  cities, 
will  be  well  worth  a  considerable  study.  Thus 
the  differences  in  the  values  of  pieces  of  real  estate 
which  seem  to  have  identical  values,  because  of 
the  apparently  equal  values  of  the  lots  and  the 
assured  equal  costs  of  the  improvements,  when 
situated  in  different  cities  will  often  prove  to  be 
astonishing  to  those  who  are  unaccustomed  to 
such  comparisons.  These  remarkable  variations 
are  to  be  explained  by  the  facts  that  the  market- 
able values  of  similarly  located  vacant  lots  in 
different  cities  differ  widely  because  of  the  differ- 
ent requirements  and  demands  of  business,  and 


Mortgages  I53 

that  the  values  of  similar  buildings  which  are 
located  in  different  cities  will  vary  widely  because 
of  the  differences  in  the  amounts  of  rentals  which 
may  be  obtained. 

If  investors,  who  have  been  accustomed  to 
loaning  money  on  mortgages  in  cities  where  real 
estate  values  are  comparatively  low,  shall  imder- 
take  to  invest  in  mortgages  in  cities  where  these 
values  are  high,  the  result  of  a  failure  properly 
to  consider  these  facts  may  be  the  refusal  of  first- 
class  applications  because  of  the  investors'  suspi- 
cions that  the  valuations  are  in  fact  much  too  high. 
And,  on  the  other  hand,  if  relative  actual  values 
in  the  cities  where  proposed  investments  are  to 
be  made  are  much  lower  than  in  the  cities  where 
the  investors  have  been  accustomed  to  loan 
money  on  mortgages,  the  probable  result  of 
neglecting  the  considerations  in  question  will  be 
inadequate  securities  and  consequently  bad 
investments. 

Careful  comparisons  of  various  values  in  cities 
where  proposed  investments  are  to  be  made,  in 
connection  with  inquiries  into  the  business  ad- 
vantages and  renting  capabilities  of  the  real  estate, 
will  in  all  cases  lead  to  satisfactory  solutions  of 
such  apparently  difficult  problems. 

The  particular  kind  of  business  which  is  to  be 
carried  on  in  a  building  upon  which  it  shall  be 
proposed  to  loan  money  is  worthy  of  some  notice; 
for  the  wear  and  tear  upon  buildings,  and  conse- 


154    The  American  Business  Woman 

quently  the  durability  of  the  buildings,  will  be 
very  different  for  different  branches  of  business. 
Thus,  taking  extreme  cases,  for  the  sake  of  a  better 
illustration:  it  will  be  evident  that  a  retail  jeweller 
will  preserve  the  premises  which  he  occupies  in 
good  condition,  for  his  own  benefit,  if  for  no  other 
reason;  while  a  dealer  in  heavy  materials,  such  as 
iron  pipes  or  plumbers'  supplies,  will  necessarily 
leave  his  premises  in  a  damaged  condition. 

^  Protection  Against  Fire. — While  a  mortgage 
upon  a  piece  of  land,  upon  which  is  erected  a 
building,  will  cover  equally  both  the  land  and  the 
building,  and  while,  for  the  most  practical  pur- 
poses, the  two  are  properly  considered  as  together 
forming  one  piece  of  real  estate  and  one  security 
for  the  mortgage,  yet  there  is  a  distinction  be- 
tween the  two,  which  must  not  be  neglected. 
The  land  is  permanent,  and,  presuming,  as  a 
matter  of  course,  that  all  necessary  legal  pre- 
cautions have  been  taken,  cannot  fail  to  remain  as 
a  definite  security  for  the  mortgage.  But  not 
so  the  building.  Fire  may  at  any  time  entirely 
destroy  it ;  extraordinary  efforts  of  nature,  such  as 
lightning,  cyclones,  or  earthquakes,  may  demolish 
it;  or  extreme  and  wanton  abuse  may  render  it 
almost  useless. 

To  protect  mortgagees  perfectly  against  possible 
injuries  to  their  securities,  as  well  as  to  protect 
the  equities  of  the  mortgagors  in  the  buildings 


Mortgages  155 

which  are  erected  upon  mortgaged  premises, 
from  any  and  all  threatened  dangers,  is  practically 
an  impossibility.  But  protection  against  fire  will 
be  afforded,  to  a  more  or  less  satisfactory  extent, 
by  the  ordinary  system  of  fire  insurance;  and 
certain  precautions,  which  are  to  be  embodied  in 
the  mortgage  deeds,  to  which  a  sufficient  reference 
will  be  made  in  the  proper  place,  will  to  a  certain 
extent  remove  other  dangers. 

In  all  cases  where  improved  real  estate  shall  be 
mortgaged,  the  mortgagors  should  be  required  to 
agree  to  keep  the  buildings  upon  the  mortgaged 
premises  insured  against  fire  for  the  benefit  of  the 
mortgagees.  Insurance  policies  which  shall  be 
issued  in  pursuance  of  such  agreements  should 
state  the  names  of  the  mortgagees  by  including 
a  clause  like  the  following:  "Loss,  if  any,  payable 
to  Mary  J.  Doe,  mortgagee,  as  interest  may 
appear." 

Mortgagees  must  see  to  it  that  the  amounts  of 
the  policies  shall  be  sufficient;  that  the  insurance 
companies  shall  be  satisfactory;  and  that  the 
descriptions  of  the  mortgaged  premises  which  are 
contained  in  the  policies  shall  be  correct. 

An  important  clause  which  should  be  attached 
to  the  insurance  policy  of  mortgaged  premises  is 
known  as  the  mortgagee  clause.  It  is  an  agreement 
on  the  part  of  the  insurance  company  that  the 
insurance,  as  to  the  interests  of  the  mortgagee, 
shall  not  be  invalidated  by  any  act  or  neglect  of 


156    The  American  Business  Woman 

the  mortgagor  or  owner,  provided  the  mortgagee 
shall  pay  the  premiums  if  the  mortgagor  shall 
fail  to  do  so,  and  provided  the  mortgagee  shall 
notify  the  insurance  company  of  any  changes  of 
ownership  in  the  mortgaged  premises,  and  of  any 
increases  of  hazard  which  shall  come  to  the 
knowledge  of  the  mortgagee. 

Bonds  Accompanying  Mortgages. — The  bonds 
(or  promissory  notes)  which  accompany  mort- 
gages, as  evidences  of  the  debts,  are,  in  themselves, 
valid  obligations,  upon  the  strength  of  which  the 
moneys  which  have  been  loaned  may  be  recovered 
by  means  of  ordinary  lawsuits,  provided  the  re- 
sponsibilities of  obligors  shall  be  sufficient.  Never- 
theless, as  has  been  sufficiently  indicated  in  the 
preceding  pages,  such  facts  must  not  be  at  all  relied 
upon  in  the  consideration  of  the  values  of  securities 
for  mortgages,  except  that,  as  possible  additional 
securities,  bondsmen,  who  shall  have  the  reputa- 
tions and  appearances  of  responsibility,  should 
be,  of  course,  preferred. 

If  the  real  estate  upon  which  money  has  been 
loaned  shall  be  an  ample  security,  evidently  it 
will  make  little  difference  to  what  extent  the 
obligor,  in  a  bond  or  note,  shall  be  responsible ;  and 
if  the  real  estate  shall  not  be  a  sufficient  security, 
it  may  be  considered  a  foregone  conclusion  that 
the  mortgagee  will  suffer  loss,  so  small  is  the 
proportion  of  obligors  of  this  kind  who  will  be 


Mortgages  157 

found  to  be  serviceable  for  the  purpose  of  mak- 
ing good  deficiencies.  Still,  since  in  theory  the 
obligor  is  bound  to  pay  the  debt,  and  is  liable  for 
any  deficiency  which  may  remain  after  foreclosure 
and  the  sale  of  the  mortgaged  premises  it  will 
be  worth  while  that  responsible  obligors  be  chosen 
if  the  possibility  of  choice  shall  exist.  The  com- 
mon practice  is  that  the  owner  or  owners  of  real 
estate  upon  which  money  shall  be  loaned  (the 
mortgagor  or  mortgagors)  alone  shall  execute  the 
bond  of  note  which  accompanies  the  mortgage; 
but  if  there  shall  be  a  willingness  on  the  part  of 
mortgagors  and  their  friends,  mortgagees  may  well 
obtain  bonds  or  notes  upon  which  there  shall  be 
several  obligors,  thus  increasing  the  chances  of 
recovering  possible  deficiencies. 

In  a  large  number  of  cases  the  owners  of  mort- 
gaged premises  and  obligors  on  the  accompanying 
bonds  become  different  persons,  because  of  one  or 
more  transfers  of  the  mortgaged  premises  subject 
to  the  mortgages.  In  such  cases  the  obligors  on 
the  bonds  will  still  be  liable  for  the  debts,  as  if  no 
transfers  had  been  made,  unless  actually,  or  by 
construction  of  law,  they  shall  be  released  from 
liability  by  some  acts  on  the  parts  of  the  mort- 
gagees. It  will  therefore  be  the  part  of  wisdom 
in  such  cases  to  have  no  understandings  or  agree- 
ments with  bondsmen  which  may  be  construed 
as  considerations  for  their  releases  from  the 
obligations  of  the  bonds. 


15B    The  American  Business  Woman 

Margin  of  Safety  in  Mortgages. — In  the 

simplest  manner  of  statement,  the  margin  of  safety 
in  the  case  of  a  mortgage  upon  real  estate  (the 
difference  between  the  actual  value  of  the  mort- 
gaged premises  and  the  amount  of  the  mortgage), 
must  be  such  that  the  real  estate  will,  under  the 
disadvantages  of  a  forced  sale,  and  probably  in  a 
time  of  business  depression,  surely  sell  for  an 
amount  which  will  be  sufficient  to  pay  all  prior 
charges  which  may  exist  against  the  real  estate, 
the  expenses  of  the  foreclosure  proceeding,  and  the 
amount  of  the  mortgage  with  the  interest  which 
may  be  due  upon  it.  The  amounts  of  these 
various  items  will  depend  to  a  considerable  extent 
upon  the  lenity  which  has  been  accorded  the 
mortgagor  in  any  particular  case.  Thus,  if  the 
mortgagee  shall  generously  (or  carelessly)  allow 
the  mortgagor  to  remain  in  possession  of  the 
mortgaged  premises  for  a  long  time  after  default 
shall  have  been  made  in  the  payment  of  interest, 
the  arrears  of  interest  certainly,  and  the  arrears  of 
taxes  and  assessments  probably,  will  be  greater 
than  if  the  mortgage  shall  be  foreclosed  shortly 
after  the  default.  Therefore,  if  the  margin  of 
safety  shall  be  small,  the  mortgagee  must,  for  her 
own  protection,  allow  the  mortgagor  but  little 
leeway,  with  respect  to  such  items  of  expense; 
while  if,  on  the  contrary,  there  shall  be  an  ample 
margin  of  safety,  it  will  be  but  ordinary  generosity 
to  allow  to   the   mortgagor    a    reasonable    time 


Mortgages  159 

during  which  he  may  recover  from  temporary 
difficulties,  and  thus  save  his  equity  in  the  mort- 
gaged premises,  taking  care,  however,  that  the 
interest  of  the  mortgagee  shall  not  be  actually 
placed  in  jeopardy. 

The  rule  of  safety  which  is  universally  recog- 
nized among  business  persons,  and  which,  in 
the  majority  of  cases,  will  be  strictly  adhered  to, 
will  require  that  obligations  of  all  kinds  shall 
be  promptly  met,  and  that  little  lenity  shall  be 
allowed.  The  disposition  to  be  generally  indulgent 
toward  debtors  is,  without  doubt,  one  of  the  most 
dangerous  of  tendencies,  and  at  the  same  time  a 
disposition  which  will  be,  for  the  most  part,  but 
poorly  appreciated.  We  must,  therefore,  insist 
upon  reasonably  prompt  fulfilments  of  all  business 
obligations,  except  in  rare  cases  in  which  we  can, 
without  injury  to  our  own  interests,  be  of  actual 
benefit  to  others  who  shall  be  worthy  of  our 
generosity. 

A  general  rule  among  the  investors  of  a  score 
of  years  ago  was  that,  in  times  of  depressed  land 
values,  fifty  to  sixty  per  cent,  should  be  the  proper 
ratio  of  a  loan  upon  real  estate  to  the  value  of  the 
premises,  and  that  this  ratio,  in  times  of  inflated 
values,  must  be  reduced  to  from  forty  to  fifty 
per  cent.  At  the  present  time,  an  owner  of 
desirable  real  estate  in  the  city  of  New  York  (or 
probably  in  certain  other  cities)  will  have  little 
difficulty  in  obtaining  a  loan  which  will  amount 


i6o    The  American  Business  Woman 

to  from  seventy  to  eighty  per  cent,  of  the  value 
of  the  real  estate,  and  this  at  the  rate  of  five  per 
cent,  interest. 

A  brief  consideration  of  this  question  will  make 
clear  the  fact  that  elements  which  will  have 
important  effects  upon  the  determination  of  the 
safe  ratios  of  loans  to  the  values  of  the  real  estate 
will  be  the  general  characters  of  the  premises  with 
regard  to  fluctuations  in  values  and  utility  for  the 
purposes  of  renting.  In  many  of  the  large  cities 
there  are  pieces  of  real  estate  which,  because  of 
their  desirability  for  the  purposes  of  business  or 
of  first-class  residences,  have  maintained  and  do 
maintain  very  nearly  or  quite  uniform  values, 
regardless  of  the  condition  of  real  estate  values  in 
general.  It  will  be  apparent  at  once  that  much 
larger  proportional  amounts  may  safely  be  loaned 
upon  such  securities  than  upon  securities  which 
will  necessarily  be  subject  to  violent  fluctuations 
in  values.  The  question  of  stability  of  values 
is,  therefore,  a  very  important  one,  and  proposed 
mortgagees,  when  fixing  upon  valuations  of  real 
estate  which  shall  be  intended  to  secure  investments 
must  consider  carefiilly  whether  the  prices  of  such 
real  estate  which  are  common  at  the  time  of  the 
valuations  shall  be  higher  or  lower  than  the 
averages  of  considerable  numbers  of  periods, 
both  of  depressed  and  of  inflated  values. 

Legal   Precautions. — The  general   requisite 


Mortgages  i6i 

for  the  safety  of  mortgages  which  remains  to  be 
discussed  is  that  the  requirements  and  precautions 
of  the  law  shall  be  carefully  complied  with;  and, 
although  all  the  requirements  of  the  law  are 
presumably  also  precautions,  it  must  be  noticed 
that  the  actual  requirements  of  the  law  do  not 
include  all  the  legal  precautions  which  may  be 
necessary.  The  legal  precautions,  then,  which 
are  actual  requirements  of  the  law, — that  is, 
without  which  mortgages  will  be  practically  void, 
— are  that  the  legal  papers  shall  be  drawn  and 
executed  according  to  the  prescribed  forms;  that 
the  entire  proceedings  shall  be  lawful  in  their 
natures  (not  usurious  or  in  other  respects  fraudu- 
lent); and  that  the  mortgages  shall  be  recorded 
in  the  public  offices  which  are  provided  for  such 
purposes. 

Concerning  the  first  two  of  these  requirements, 
it  is  necessary  only  to  remark  that  the  first  may 
safely  be  left  to  the  lawyers  who  must  necessarily 
have  the  legal  charge  of  such  matters,  and  that 
the  second  will  be  provided  against  by  the  exercise 
of  common  and  easily  distinguishable  honesty. 

As  far  as  the  validity  of  agreements  between 
mortgagors  and  mortgagees  is  concerned,  the 
recording  of  mortgages  is  not  a  legal  necessity. 
But,  for  the  purpose  of  giving  notice  of  the  mort- 
gages to  all  other  parties,  this  proceeding  is  neces- 
sary, and  the  only  one  which  is  regularly  provided 

by  law.    And  since,  without  such  public  notice, 
II 


1 62    The  American  Business  Woman 

mortgages  will  not  be  protected  by  the  laws  against 
sales  of  the  mortgaged  premises  to  persons  having 
no  knowledge  of  the  mortgages,  or  against  subse- 
quent mortgages  which  may  be  made  to  persons 
who  shall  be  equally  innocent  in  that  respect,  it  is 
evident  that  the  recording  of  mortgages  is  a 
proceeding  of  vital  importance  to  mortgagees.  In 
all  cases,  mortgages  should  be  recorded  without 
unnecessary  delays,  even  of  the  shortest  durations, 
after  they  have  been  executed  by  the  proper 
parties ;  they  are  usually  recorded  by  the  lawyers  of 
the  mortgagees,  in  order  to  make  sure  that  such  an 
important  requisite  shall  be  properly  attended  to. 

Since  the  bonds  or  notes  which  accompany 
mortgages  are  merely  the  written  evidences  of  the 
debts  which  exist  between  the  mortgagors  and 
the  mortgagees,  and  do  not  in  themselves  establish 
liens  against  the  mortgaged  real  estate,  they  are 
not  intended  to  be  recorded,  but  should  be  care- 
fully preserved,  during  the  lifetimes  of  the  mort- 
gages, among  the  important  documents  belonging 
to  mortgagees. 

The  legal  precautions  which  are  necessary  for 
the  safety  of  the  mortgages,  although  not  actually 
required  by  the  law  to  establish  their  validity, 
are  that  the  bonds  and  mortgages  shall  express,  in 
proper  language,  the  intentions  of  the  parties, 
and  that  they  shall  include  all  the  necessary 
covenants  and  agreements  which  have  been 
devised  for  the  benefit  of  mortgagees. 


Mortgages  163 

Agreements  in  Bonds. — The  principal  parts 
of  a  bond  which  accompanies  a  mortgage,  or,  as 
it  is  sometimes  called,  a  real  estate  bond,  are  the 
penalty,  the  condition,  and  the  covenants. 

The  penalty  states  that  the  obligor  (by  name) 
is  held  and  firmly  bound  unto  the  obligee  (also  by 
name)  in  a  sum  which  is  usually  double  the  actual 
amount  of  the  indebtedness,  to  be  paid  to  the 
obligee  or  to  his  or  her  heirs,  executors,  administra- 
tors, or  assigns;  for  which  payment  the  obligor 
binds  himself  or  herself  and  his  or  her  heirs, 
executors,  administrators,  and  assigns. 

The  condition  of  a  bond  states  that,  if  the 
obligor  or  his  or  her  heirs,  executors,  administra- 
tors, or  assigns  shall  pay  to  the  obligee,  or  to  his 
or  her  heirs,  executors,  administrators,  or  assigns, 
a  sum  of  money  which  is  equal  to  the  actual 
amount  of  the  indebtedness,  upon  a  certain  date, 
with  interest  at  a  certain  rate,  and  payable  at 
certain  times,  the  obligation  shall  be  void;  other- 
wise to  remain  in  full  force. 

The  following  covenants  or  agreements  will  be 
sufficient  in  all  ordinary  cases  to  furnish  the 
necessary  legal  protection  for  the  mortgagee: 

(i)  An  agreement  that  if  default  shall  be  made 
in  the  payment  of  interest,  taxes,  or  assessments, 
the  principal  sum,  with  all  arrears  of  interest,  shall, 
at  the  option  of  the  obligee,  or  his  or  her  legal 
representatives  or  assigns,  immediately  become 
due,  although  the  period   limited    in    the  bond 


1 64    The  American  Business  Woman 

for  the  payment  of  the  principal  may  not  have 
expired. 

(2)  An  agreement  that,  if  default  shall  be 
made  in  the  payment  of  the  principal  sum,  interest, 
taxes,  or  assessments,  the  obligee  and  his  or  her 
legal  representatives  or  assigns  shall  have  the  right 
forthwith  to  take  possession  of  the  mortgaged 
premises  and  apply  the  rents,  issues,  and  profits  to 
the  payment  of  the  debt;  and  also  that  the 
obligee  and  his  or  her  legal  representatives  and 
assigns  shall  have  the  right,  after  such  default,  to 
have  appointed  by  the  court  a  receiver,  who  shall 
take  possession  of  the  mortgaged  premises  pending 
foreclosure  proceedings. 

(3)  An  agreement  to  the  effect  that  the  obligor 
shall  insure  the  mortgaged  premises  in  approved 
insurance  companies,  and  to  an  amoimt  which 
shall  be  approved  by  the  obligee,  and  that,  in  case 
of  a  failure  to  do  so,  the  obligee  may  insure  the 
premises  and  charge  the  expenses  against  the 
obligor  as  an  additional  lien  upon  the  premises. 

The  covenants  or  agreements  which  have  been 
described  are  generally  considered  to  be  sufficient 
for  purposes  of  reasonable  security,  and  make  up 
what  passes  generally  for  an  ample  bond.  But 
there  is  another  agreement,  not  at  all  common  in 
bonds  and  mortgages,  which  imder  certain  con- 
ditions may  be  of  very  great  importance.  In  the 
chapter  on  general  principles  of  investment,  the 
subject  of  the  relative  values  of  money,  as  affected 


Mortgages  165 

by  the  general  credit  of  the  government  which 
issues  the  money,  and  the  standard  to  which  the 
money  shall  be  finally  reducible,  has  been  discussed 
at  some  length.  It  is  evident  that  the  conclusions 
which  have  been  reached  in  that  discussion  will  be 
applicable  in  their  strictest  senses  to  loans  which 
are  secured  by  bonds  and  mortgages.  Therefore 
if,  in  the  judgment  of  an  investor,  there  shall  be 
a  reasonable  possibility  that  the  loan  will  be 
repaid  in  depreciated  money,  or  that  the  interest 
will  be  paid  in  money  of  a  lower  value  than  the 
standard,  an  agreement  should  be  included  in  the 
bond  to  the  effect  that  the  principal  sum  and 
the  interest  shall  be  paid  "in  gold  coin  of  the 
United  States  of  America,  of  the  present  weight 
and  fineness,  or  its  just  and  full  equivalent.*' 

Agreements  in  Mortgages. — ^The  principal 
features  of  the  mortgage  which  is  to  accompany 
a  bond  such  as  has  been  described  may  be  briefly 
stated  in  the  following  manner: 

The  mortgage  should  properly  name  the  parties, 
and  state  that  the  mortgagor  is  indebted  to  the 
mortgagee  in  a  certain  sum  of  money,  secured  to 
be  paid  by  a  certain  bond,  conditioned  for  the 
payment  of  the  said  sum,  at  the  time,  and  with 
the  interest,  specified  in  the  bond.  There  should 
be  a  clause  conveying  to  the  mortgagee  and  to  his 
or  her  heirs  and  assigns  forever  the  mortgaged 
premises,  which  should  be  carefully  and  accurately 


i66    The  American  Business  Woman 

described.  Next  in  order  should  come  the  proviso 
that  if  the  mortgagor  shall  pay  the  sum  mentioned 
in  the  condition  of  the  bond,  and  the  interest  as 
provided  in  the  condition  of  the  bond,  then  the 
mortgage  and  the  estate  granted  by  it  shall  cease, 
determine,  and  be  void.  The  mortgage  should 
then  contain  the  same  agreements  as  the  bond, 
and  in  addition,  agreements  that  the  mortgagor 
will  forever  warrant  the  title  to  the  mortgaged 
premises,  and  will  execute  any  other  instruments 
which  may  be  necessary  for  the  further  assurance 
of  the  title. 

A  mortgage  may  also  contain  a  clause  to  the 
effect  that  the  mortgagee  may  foreclose  the 
mortgage  if  the  mortgaged  premises  shall  be 
allowed,  by  the  mortgagor,  to  become  dilapidated 
or  ruinous  in  condition;  although  such  a  clause 
is  not  very  common,  for  the  reason  that,  if  correct 
conclusions  with  regard  to  the  value  of  the  mort- 
gaged premises  and  of  the  margin  of  safety  have 
been  reached  by  the  mortgagee,  ample  provisions 
will  have  been  made  for  any  damage  to  the 
mortgaged  premises  which  may  reasonably  be 
apprehended. 

Assignment  of  Mortgages. — The  sale  or 
transfer  of  the  rights  of  a  mortgagee  in  a  bond  and 
mortgage  is  called  an  assignment  of  the  mortgage. 
The  general  effect  of  an  assignment  of  a  mortgage 
is  to  transfer  to  the  assignee  all  the  rights  which 


Mortgages  167 

the  assignor  had  in  the  bond  and  mortgage  before 
the  assignment  was  made,  and  all  the  rights  in  the 
bond  and  mortgage  which  the  assignor  would 
have  had  in  the  future,  if  the  assignment  had  not 
been  made.  The  legal  instrument  by  which  such 
a  transfer  is  made,  also  called  an  assignment  of 
mortgage,  is  a  written  instrument,  signed,  sealed, 
and  acknowledged  by  the  assignor,  and  recorded 
in  the  same  manner  as  a  mortgage. 

An  assignment  of  a  mortgage  should  state  that, 
for  a  good  and  valuable  consideration,  the  party 
of  the  first  part  (the  assignor)  grants,  bargains, 
assigns,  etc.,  to  the  party  of  the  second  part  (the 
assignee)  the  mortgage  (carefully  described  by 
date,  names  of  parties,  and  place  and  date  of 
record) ,  together  with  the  bond  therein  described, 
and  the  money  due  or  to  grow  due  thereon,  with 
the  interest;  and  that  the  assignor  constitutes 
the  assignee  his  or  her  attorney  to  act  as  the 
assignor  might  have  acted  if  the  assignment  had 
not  been  made. 

Discharging  of  Mortgages. — Mortgages  upon 
real  estate  may  be  discharged  or  destroyed  in  three 
different  ways :  by  merger,  by  the  payment  of  the 
mortgage  debts,  or  satisfaction  of  the  mortgage, 
and  by  foreclosure.  If  a  mortgagee  shall  purchase 
outright  the  mortgaged  real  estate,  the  mortgage 
will  be  destroyed;  or,  as  lawyers  say,  the  mortgage 
will  merge  in  the  absolute  ownership;  for  it  is 


1 68    The  American  Business  Woman 

absurd  to  suppose  that  persons  may  hold  mortgages 
against  themselves.  But  evidently  the  theory  of 
merger  must  apply  only  to  the  particular  mortgages 
of  which  the  purchaser  of  the  mortgaged  premises 
was,  before  the  purchase,  the  owner.  Therefore 
if  the  mortgagee  of  a  second  or  third  mortgage  shall 
purchase  the  mortgaged  real  estate,  only  the 
second  or  third  mortgage  will  merge,  and  the 
purchaser  will  take  the  real  estate  subject  to  all 
other  imdischarged  mortgages  and  liens. 

When  a  mortgagor  shall  pay  the  debt  for  the 
security  of  which  the  bond  and  mortgage  have 
been  made,  the  mortgagee  must  surrender  to 
the  mortgagor  the  bond  and  mortgage;  and,  for 
the  purpose  of  discharging  the  mortgage  upon  the 
public  records,  a  legal  paper,  which  is  called  a 
satisfaction^  or  a  satisfaction-piece,  must  be  given 
to  the  mortgagor.  A  satisfaction-piece  is  a 
certificate,  signed  and  acknowledged  by  the  mort- 
gagee, to  the  effect  that  the  mortgage  (described 
in  the  same  manner  as  in  an  assignment  of  mort- 
gage), is  paid,  and  that  the  mortgagee  consents 
that  it  be  discharged  of  record.  The  mortgagor 
must  then  file  the  satisfaction-piece  in  the  public 
office  where  the  mortgage  is  recorded,  and  the 
mortgage  will  be  accordingly  discharged. 

Foreclosure  of  Mortgages. — As  has  been 
already  explained,  the  remedy  of  a  mortgagee 
for  the  non-payment  of  interest,  taxes,  or  the 


Mortgages  169 

principal  amount  of  a  mortgage  when  due,  is  the 
foreclosure  of  the  mortgage.  The  foreclosure  of  a 
mortgage  is  a  legal  proceeding  of  a  technical  and 
somewhat  difficult  character,  varying  somewhat 
in  the  different  States.  A  general  description  of 
the  proceeding,  sufficiently  explicit  for  the  pur- 
poses of  this  work,  may  be  given  in  the  following 
manner : 

A  legal  action,  upon  proper  notice  to  the  mort- 
gagor and  to  other  interested  parties,  is  brought 
in  the  proper  court,  in  which  action  all  the  facts 
concerning  the  bond,  mortgage,  and  default  are 
placed  before  the  court,  with  a  demand  for  judg- 
ment that  the  mortgagor  and  all  subsequent 
lienors  shall  be  barred  and  foreclosed  of  all  rights 
in  the  mortgaged  premises,  and  that  the  premises 
may  be  sold,  according  to  law,  for  the  payment 
of  the  principal  debt,  interest,  and  expenses. 

The  final  result  of  a  foreclosure  proceeding  is 
that  the  mortgaged  premises  will  be  sold  at  public 
auction  for  the  benefit  of  the  mortgagee.  The 
mortgagee,  either  in  person  or  by  representation, 
must,  without  fail,  be  present  at  the  sale  of  the 
mortgaged  premises.  If  then  no  bids  of  amounts 
sufficient  to  pay  the  debt  and  the  expenses  shall  be 
received,  or  if  for  any  other  reason  the  mortgagee 
shall  be  desirous  of  acquiring  the  property,  it 
may  be  bid  in  and  purchased  by  the  mortgagee 
in  the  same  manner  as  it  may  be  by  any  other 
bidder.     If  the  mortgaged  premises  shall  sell  at 


170    The  American  Business  Woman 

a  price  which  is  insufficient  for  the  payment  of  the 
charges  against  it,  a  judgment  for  the  deficiency 
will  be  rendered  by  the  court  against  the  obligors 
on  the  bond.  The  effect  of  a  foreclosure  sale  is 
to  transfer  (by  the  deed  of  the  officer  making  the 
sale)  the  mortgaged  premises  to  the  purchaser 
free  and  clear  of  the  mortgage  which  has  been 
foreclosed  and  of  all  other  mortgages  and  liens 
which  are  subsequent  to  the  one  which  has  been 
foreclosed. 

Extension  of  Mortgages. — The  fact  that  a 
bond  and  mortgage  shall  be  due  (that  is,  that  the 
time  which  has  been  specified  for  the  payment  of 
the  debt  shall  have  arrived)  is  not  at  all  a  necessary 
reason  for  demanding  the  payment  of  the  mort- 
gage, and  thus  terminating  the  investment; 
although  it  will  give  to  the  mortgagee  the  right 
to  demand  payment  without  regard  to  the  wishes 
of  the  debtor,  and  similarly  to  the  mortgagor  the 
right  to  pay  the  debt  and  cancel  the  bond  and 
mortgage.  No  rights  of  either  party  will  in  any 
way  be  prejudiced  by  allowing  such  a  mortgage 
to  remain  indefinitely,  without  further  agreement 
between  the  parties.  And  so  it  is  that  in  many 
cases  mortgages  have  continued  for  long  periods 
after  they  have  become  due,  the  interest  being, 
of  course,  regularly  paid,  and  the  other  agreements 
being  regularly  fulfilled  as  if  the  mortgage  were 
not  due.     The  chief  objection  to  such  a  proceeding 


Mortgages  171 

is  that  the  mortgagor  may  at  any  time,  and, 
without  satisfactory  notice,  pay  the  debt,  and 
thus  put  the  mortgagee  to  the  inconvenience  which 
often  follows  an  unexpected  payment;  and  like- 
wise the  mortgagee  may,  upon  a  day's  notice, 
demand  payment  of  the  debt,  and  in  default  there- 
of begin  foreclosure  proceedings  without  delay. 
In  order  to  avoid  the  possibility  of  such  difficulties, 
it  is  a  common  practice  to  extend  the  times  for  the 
payment  of  mortgages  for  definite  and  specified 
numbers  of  years  by  agreements  between  the 
mortgagors  and  the  mortgagees. 

An  extension  of  a  mortgage  should  be  in  writing, 
signed  and  sealed  by  the  parties  in  the  presence  of 
witnesses.  It  may  be  written  on  the  back  of  the 
bond,  and  should  state  that  the  time  for  the 
payment  of  the  amount  of  the  bond  is,  by  consent 
of  the  parties,  extended  to  a  certain  specified 
time,  and  that  all  other  conditions  and  covenants 
which  are  contained  in  the  bond  and  in  the 
mortgage  of  even  date  are  to  remain  in  full  force. 

Receipts. — An  orderly  and  systematic  method 
of  dealing  with  mortgagors,  and  of  filing  and 
preserving  the  various  papers  which  appertain 
to  investments  in  mortgages,  will  be  found  to  be 
of  great  value,  not  only  for  the  preventing  of 
oversights  which  may  result  in  serious  incon- 
venience, if  not  in  actual  losses,  but  also  for  the 
purpose  of  facilitating  the  work  which  tmavoidably 


172    The  American  Business  Woman 

attaches  to  such  transactions.  There  is  also  a 
proper  method  of  writing  receipts  and  indorse- 
ments upon  bonds,  and  this  mortgagors  are  en- 
titled to  at  the  hands  of  mortgagees,  although, 
generally  speaking,  they  may  not  be  in  positions 
to  demand  it.  If  the  mortgagor  and  the  obligor 
in  a  bond  shall  be  one  and  the  same  person,  as  is 
more  often  than  otherwise  the  case,  the  receipts 
for  interest  should  be  written  in  the  following 
manner: 

Boston,  Mass.,  Nov.  i,  1896. 
Received  of  Mr.  Richard  Roe  his  check  for  two 
hundred  and  fifty  dollars,  for  six  months'  interest 
on  his  bond  bearing  date  May  i,  1885,  to  date  (or 
to  Nov.  I,  1896),  the  same  to  be  indorsed  on 
said  bond. 

$25o.AV 
i  Mary  J.  Doe. 

If,  by  a  sale  of  the  mortgaged  premises  to  Sarah 
Clark,  Richard  Roe,  the  mortgagor  and  obligor 
on  the  bond,  shall  have  ceased  to  be  the  owner 
of  the  mortgaged  premises,  the  receipts  for  interest, 
which  is  paid  by  Sarah  Clark,  may  read  in  the 
following  manner: 

Boston,  Mass.,  Nov.  i,  1897. 
Received  of  Mrs.  Sarah  Clark  her  check  for 
two  hundred  and  fifty  dollars,  for  six  months' 


Mortgages  173 

interest  on  the  bond  of  Richard  Roe  bearing  date 
May  I,  1885,  to  date  (or  to  Nov.  i,  1897),  same 
to  be  indorsed  on  said  bond. 

$25o.AV 

Mary  J.  Doe. 

The  bonds  which  accompany  mortgages  are 
sometimes  printed  with  Hnes  and  spaces  on  the 
backs  for  the  indorsements  of  the  payments  of 
interest.  Perhaps  more  frequently  the  backs  of 
bonds  are  without  indorsement  spaces.  In  either 
case,  all  payments  of  interest  shotdd  be  indorsed 
on  the  backs  of  the  bonds  as  soon  as  the  payments 
have  been  received.  The  indorsements  should 
economize,  as  much  as  possible,  the  blank  spaces 
within  which  they  are  to  be  written,  and  may 
read  in  this  manner: 

Reed.  Nov.  i,  1896,  two  hundred  and  fifty 
dollars,  six  mos.  int.  on  within  bond  to  date  (or 

to  Nov.  I,  1896). 

Mary  J.  Doe. 

In  some  cases  bonds  and  mortgages  are  drawn 
with  agreements  to  the  effect  that  the  principal 
sums  may  be  paid  by  instalments,  or  part  pay- 
ments, at  different  specified  times.  Agreements 
of  this  kind  are  not  generally  advantageous  to 
mortgagees,  for  the  reasons  that  small  sums,  paid 
at  periods  which  are  separated  by  considerable 
intervals,  will  be  difficult  to  invest  properly  and 


174    The  American  Business  Woman 

such  payments  will  increase  considerably  the 
labor  of  keeping  accounts  and  of  calculating  and 
remembering  the  different  amounts  of  interest. 
But  bonds  and  mortgages  of  this  kind  will  present 
no  material  difficulties  other  than  those  which 
have  been  mentioned;  they,  therefore,  may  be 
used  in  cases  where  corresponding  advantages, 
in  the  way  of  additional  interest  or  improved 
securities,  may  be  obtained,  and  in  cases  where 
investors  shall  desire  to  favor  mortgagors  with 
easier  methods  of  paying  the  amounts  of  their 
indebtednesses.  When,  under  such  agreements, 
amotmts  of  the  principal  sums  shall  be  received 
from  mortgagors,  the  following  forms  of  receipts 
and  indorsements  on  the  bonds  may  be  employed : 

Boston,  Mass.,  Nov.  i,  1896. 

Received  of  Mr.  Richard  Roe  his  check  for  one 

thousand   dollars,    first   payment    (or   second   or 

third  payment)  on  the  principal  of  his  bond  (or 

the  bond  of  William  Clark),  bearing  date  May 

I,  1885,  the  same  to  be  indorsed  on  said  bond. 

$iooo.TVjr 

Mary  J.  Doe. 

Reed.  Jan.  i,  1896,  one  thousand  dollars,  first 
payment  on  principal  of  within  bond. 

Mary  J.  Doe. 

Chattel   Mortgages. — The   statements    and 
considerations  which  are  thus  far  contained  in  the 


Mortgages  175 

present  chapter  have  been  confined  to  mortgages 
upon  real  estate  securities,  for  the  reason  that  such 
mortgages  are  of  far  greater  importance  and 
advantage  than  those  of  any  other  descriptions. 
But  it  must  not  be  supposed  that  real  estate  is 
the  only  kind  of  property  which  may  lawfully  be 
made  the  subject  of  a  mortgage  transaction. 
Almost  all  kinds  of  real  and  personal  property 
may  be  lawfully  mortgaged,  the  dividing  line  of 
distinction  being  between  all  kinds  of  property 
which  are  capable  of  absolute  sale,  which  may  be 
mortgaged,  and  mere  possibilities  of  ownership 
or  expectancies,  which  may  not  be  mortgaged. 
Hence,  not  only  the  various  interests  in  real  estate 
other  than  absolute  ownerships  (such  as  an  owner- 
ship for  life,  a  leasehold,  a  judgment  lien,  or  a 
mortgage  itself)  may  be  mortgaged,  but  also 
furniture,  jewelry,  clothing,  horses,  carriages, — 
in  short,  all  kinds  of  personal  belongings  and 
chattels  may  be  made  the  securities  for  mortgages. 
Mortgages  on  goods  and  chattels,  or  chattel 
mortgages,  may  be  classed  as  among  the  most 
common  methods  of  securing,  or  of  attempting 
to  secure,  loans,  more  often  than  otherwise  of 
small  amounts.  Special  laws  have  been  enacted, 
providing  methods  of  recording  or  filing  chattel 
mortgages,  and  purporting  to  provide  against 
fraud  by  requiring  that  copies  of  the  mortgages, 
certified  by  the  mortgagees,  shall  be  filed,  at 
certain    specified   periods,    and   also   by   making 


176    The  American  Business  Woman 

removals  of  the  mortgaged  chattels,  without  the 
consents  of  the  mortgagees,  punishable  offences. 

Chattel  mortgages  usually  are  not  accompanied 
by  bonds,  notes,  or  other  evidences  of  the  debts, 
statements  of  the  debts  and  agreements  to  pay 
the  same,  or  any  deficiencies  which  may  remain 
after  sales  of  the  mortgaged  chattels,  being  in- 
cluded in  the  mortgages. 

With  regard  to  the  value  of  all  kinds  of  personal 
property  as  securities  for  loans,  and  as  compared 
with  real  estate  securities,  two  principal  and  very 
important  differences  will  appear :  first,  real  estate 
is  actually  permanent,  and  cannot  be  easily  lost, 
stolen,  hidden,  or  destroyed,  while  personal 
property,  from  its  very  nature  may  be  moved 
from  place  to  place,  concealed,  hidden,  or  de- 
stroyed at  the  will  of  the  persons  having  the 
possession;  and,  secondly,  the  title  to  real  estate 
is,  generally  speaking,  a  matter  of  public  record, 
and  the  proof  of  title  is  usually  a  matter  of  docu- 
mentary evidence,  while  the  ownership  of  personal 
property  is  often  extremely'  uncertain,  and  the 
proof  of  ownership  may  be  a  proceeding  of  great 
difficulty. 

These  objections  to  personal  property  as  safe 
securities  for  mortgage-investments  are  of  vital 
consequence,  since  they  may  render  the  titles 
to  the  securities  uncertain,  and  may  place  the 
securities  themselves  beyond  the  control  of  in- 
vestors.    For  these  reasons  alone,  mortgages  upon 


Mortgages  177 

chattel  securities  will  come  far  short  of  the  require- 
ments which  we  have  found  to  be  necessary  for 
the  safety  of  investments,  and  accordingly  they 
must  be  placed  among  the  dangerous  investments 
which  are  to  be  at  all  times  avoided. 

In  concluding  the  discussion  of  the  subject  of 
mortgages,  it  must  be  remarked  that,  search  and 
investigate  as  diligently  as  we  may,  no  form  of 
loan-investment  which,  in  points  of  safety,  sim- 
plicity, certainty  of  income,  and  freedom  from 
the  demands  of  an  arduous  and  irksome  vigilance, 
will  be  found  to  be  equal  to  loans  which  are  secured 
by  satisfactory  bonds  and  mortgages  upon  real 
estate  will  be  found.  And  further,  it  may  be 
said  that  investors  who,  stemming  the  current  of 
modem  popular  tendency  towards  supposed  newly 
discovered  methods  shall  confine  their  loan- 
investments  steadily  to  mortgages  upon  real  estate, 
will  not  fail  to  reap  the  substantial  benefits  which 
are  to  be  obtained  only  by  a  manner  of  proceeding 
which  shall  be  at  once  uniform,  systematic, 
judicious,  and  cautious. 


CHAPTER  VIII 

REAL  PROPERTY 

BY  the  term  real  property^  or,  in  the  common, 
although  technically  improper,  language  of 
the  masses,  real  estate y  we  mean  land  and  that 
which  is  attached  to  it — in  short,  and  with  suf- 
ficient accuracy  for  the  purposes  of  this  work, 
land  and  buildings. 

Estates  in  Land. — There  are  many  different 
kinds  of  interests  in  lands,  some  simple,  others 
intricate  and  difficult  to  understand.  It  appears 
to  be  entirely  unnecessary  that  all  such  interests 
shall  be  explained  in  a  work  of  this  description; 
but  it  will  be  beneficial  to  define  simply  and 
briefly,  the  common  kinds  of  ownership,  or  partial 
ownership,  of  land  with  which  the  business  woman 
ought  to  be  familiar. 

The  word  "estate,"  as  applied  to  land,  properly 
means  interest  or  kind  of  ownership.  We  therefore 
speak  of  a  tenant^s  interest  in  the  leased  land  as  a 
leasehold  estate,  and  of  an  ownership  of  land  for 
life  as  a  life  estate. 

The  greatest  estate  which  may  be  had  in  land  is 
'       -  178 


Real  Property  179 

an  absolute  ownership,  or  such  an  ownership  that 
the  land  may  be  sold  or  devised  by  will, or  will  pass 
to  the  heirs  by  inheritance.  Such  an  estate,  in 
England,  where  there  are  other  estates  to  dis- 
tinguish, is  called  an  estate  in  fee  simple ^  or  in 
fee  simple  absolute,  and  in  the  United  States 
generally  an  estate  in  fee,  or  an  absolute  estate. 

The  second  greatest  estate  in  land  is  an  estate 
for  life;  that  is,  an  ownership  of  land  which  a 
person  may  have  during  his  or  her  lifetime,  the 
land,  after  the  death  of  the  owner  for  life  (or  tenant 
for  life),  to  pass  to  other  persons.  The  estate  of 
the  last  mentioned  persons  is  called  an  estate  in 
remainder,  because  it  is  the  part  which  remains  of 
the  absolute  estate,  after  taking  out  the  estate  for 
life.  The  common  forms  of  estates  for  life  are 
the  estate  in  dower,  which  is  the  life  estate  which  a 
widow  has  in  one  third  of  the  real  property  owned 
by  her  husband  at  the  time  of  his  death;  the 
estate  by  curtesy,  which  is  the  life  estate  which  a 
husband  has  in  all  the  real  property  owned  by  his 
wife  at  the  time  of  her  death,  provided  the  wife 
shall  not  have  devised  the  land  by  will,  and  pro- 
vided a  child  shall  have  been  bom  alive  to  the 
husband  and  wife;  and  an  estate  for  life,  which 
comes  to  a  person,  not  by  act  of  the  law  (as  dower 
or  curtesy),  but  by  deed  or  by  will. 

Estates  for  years  are  all  estates  in  land  which 
expire  or  terminate  at  fixed  periods,  as  the  estate 
of  the  tenant  to  whom  land  shall  be  leased  for  a 


i8o    The  American  Business  Woman 

certain  definite  period.  The  estate  of  the  land- 
lord in  the  leased  land,  and  which  will  revert  to 
him  after  the  termination  of  the  lease,  is  called 
an  estate  in  reversion. 

The  rule  of  merger,  with  regard  to  mortgages, 
has  been  referred  to  in  the  preceding  chapter.  It 
may  be  remarked  here  that  whenever  two  estates 
in  the  same  land  shall  come  to  the  same  person, 
without  any  intervening  estate,  the  smaller  estate 
will  be  swallowed  up  by,  or  merged  into,  the 
greater  estate.  Thus,  if  a  tenant  for  life  shall 
purchase  the  estate  in  fee,  the  estate  for  life  will 
be  merged  in  the  greater  estate  in  fee,  for  a  man 
cannot  be  his  own  tenant.  So,  if  a  tenant  for 
years  shall  acquire  an  estate  for  life  in  the  same 
land,  the  estate  for  years  will  merge  and  disappear; 
for,  in  law,  the  estate  for  life  is  the  greater  estate, 
although  the  smaller  estate  may  be  for  a  thousand 
years.  But  if  a  tenant  for  years  shall  purchase 
the  estate  in  fee,  and  a  life  estate  belonging  to  a 
third  party  shall  exist  upon  the  land,  the  merging 
of  the  estate  for  years  in  the  estate  in  fee  (or,  in  this 
case,  the  estate  in  remainder)  will  be  prevented  by 
the  intervening  estate  for  life,  and  the  owner  of 
the  estate  in  fee  will  have  to  pay  rent  to  the  life 
tenant. 

With  regard  to  the  number  of  owners  or  tenants 
of  land  who  shall  have  the  same  estate  in  the 
same  land,  estates  may  be  in  severalty^  where  one 
person  holds  the  estate  in  his  or  her  own  separate 


Real  Property  i8i 

right ;  in  common^  where  there  are  several  owners, 
each  of  which  shall  have  a  separate  but  undivided 
interest,  which,  if  the  estate  be  in  fee,  may  be 
devised  by  will,  or  may  pass  by  inheritance  to  the 
heirs ;  or  in  joint-tenancy y  where  there  are  several 
owners  having  such  interests  in  the  land  that, 
upon  the  death  of  one  the  interest  of  the  deceased 
will  pass  to  the  remaining  owners,  all  the  interests 
finally  passing  to  the  last  survivor.  Of  the  last 
two  kinds,  estates  in  common  are  generally 
presimied  to  exist  wherever  there  are  several 
owners  of  the  same  land,  imless  an  estate  in  joint- 
tenancy  shall  have  been  expressly  provided  for  in 
the  deed  or  will  which  creates  the  estate.  Estates 
in  joint-tenancy  are  comparatively  rare  in  the 
United  States,  and  are  not  all  favored  by  the 
laws  of  the  several  States. 

The  title  (or  the  means  by  which  a  person  has 
rightful  possession)  to  real  property  may  be 
acquired  in  several  ways :  by  occupation,  as  where 
one  shall  take  and  claim  the  possession  of  wild 
land,  the  property  of  nobody;  by  adverse  possession 
where  one  shall  hold  possession  of  another's  land 
in  spite  of  the  true  owner  for  a  certain  number  of 
years,  which  has  been  prescribed  by  law  as  suffi- 
cient to  give  a  good  title  to  the  squatter;  by 
devise,  where  real  property  shall  be  given  to  a 
person  by  will;  by  descent,  where  real  property 
shall  descend  to  the  heirs-at-law;  and  by  the 
common  method  of  conveyance. 


1 82    The  American  Business  Woman 

Deeds. — Properly  speaking,  a  deed  is  any 
contract  which  shall  be  sealed  and  delivered  by 
the  parties.  Hence,  bonds,  mortgages,  leases, 
releases,  and  conveyances  are  all  deeds;  but,  by 
common  usage  in  the  United  States,  the  word  has 
come  commonly  to  signify  only  the  conveyance  or 
instrument  by  which  real  property  is  conveyed. 

The  legal  requisites  for  the  validity  of  deeds 
are:  competent  parties  or  parties  who  by  law 
are  considered  competent,  to  make  contracts — of 
proper  age  and  sufficient  understanding;  proper 
subject-matters ;  legally  sufficient  considerations ; 
writings  upon  paper  or  parchment;  proper  legal 
forms;  proper  knowledge  of  the  contents  by  the 
parties ;  signing  and  sealing  by  the  proper  parties ; 
proper  attestations,  and  delivery. 

The  proper  and  orderly  parts  which  form  a  deed 
are :  the  premises,  which  states  the  names  and  other 
designations  of  the  parties  and  describes  the 
property  which  is  affected;  the  habendum  which 
describes  the  estate  which  is  conveyed  by  the  deed 
— *'To  have  and  to  hold  the  said  premises  unto 
the  said  party  of  the  second  part,  and  his  heirs 
and  assigns  forever,"  or  "To  have  and  to  hold  etc., 
for  and  during  his  natural  life,"  or  "for  and  during 
the  term  of  ten  years";  the  reddendum,  in  which 
any  reservations  to  the  grantor  (such  as  rent)  are 
stSiied; conditions, or  the  clauses  which  may  provide 
for  the  defeating,  upon  certain  contingencies,  of  the 
estate  granted,  such  as  the  condition  of  payment  in 


Real  Property  183 

a  mortgage;  the  covenants,  or  special  agreements 
between  the  parties;  and  the  conclusion. 

It  will  be  evident  that  all  deeds  will  not  neces- 
sarily contain  all  of  the  parts  which  have  been 
mentioned,  since  some  of  them  will  apply  only 
under  special  circumstances.  For  example,  the 
ordinary  deed  of  conveyance  has  neither  reddendum 
nor  conditions,  because,  ordinarily,  nothing  is 
reserved  to  the  grantor,  and  the  premises  are 
sold  to  the  grantee  absolutely,  without  conditions ; 
in  a  lease,  the  rent  which  is  reserved  to  the  lessor 
being  of  principal  importance,  the  reddendum  will, 
of  course,  be  included. 

In  a  general  manner,  it  may  be  said  that  deeds 
of  conveyance  are  of  three  kinds:  the  bargain  and 
sale  deed,  which  simply  sells  the  land  to  the 
purchaser  without  covenants;  the  quit-claim  deed, 
which  only  gives  to  the  grantee  any  claims  to  title 
which  the  grantor  may  have  had  in  the  land ;  and 
the  full-covenant  warranty  deed,  which  contains 
all  the  ordinary  covenants  for  the  protection  of  the 
title  of  the  purchaser. 

Full-covenant  warranty  deeds  should  be  in  all 
cases  demanded,  except  when  special  circum- 
stances, which  should  seldom  arise,  shall  make 
other  arrangements  necessary.  They  are  the 
only  safe  and  reliable  conveyances  which  will 
bind  the  grantors  to  make  good  the  titles;  and  a 
refusal  on  the  part  of  a  grantor,  in  a  particular 
case  to  give  such  a  deed  should  generally,  imless 


184    The  American  Business  Woman 

satisfactorily  explained,  cast  some  suspicion  upon 
his  title. 

There  is  some  variation  in  the  forms  of  full- 
covenant  deeds  which  are  common  in  the  different 
States;  but  the  covenants  which  are  most  com- 
monly contained  in  such  deeds  are  the  covenant  of 
seizin  (rightful  possession),  and  right  to  convey, 
by  which  a  grantor  promises  that  at  the  time  of  the 
conveyance  he  is  possessed  of  a  good  and  inde- 
feasible estate  in  fee-simple  in  the  premises,  and 
that  he  has  full  power  and  lawful  authority  to  sell 
the  premises;  the  covenant  against  incumbrances ^ 
which  is  to  the  effect  that  the  premises  granted 
are  free  and  clear  of  all  former  grants  and  in- 
cumbrances ;  and  the  covenant  of  warranty  y  which 
is  a  promise,  on  the  part  of  the  grantor,  that  he 
and  his  heirs  will  forever  warrant  and  defend  the 
title  to  the  premises. 

In  addition  to  these  covenants,  there  are  two 
which  are  generally  included  in  deeds  of  con- 
veyance in  the  Eastern  and  Middle  States,  and 
which  ought  to  form  parts  of  all  properly  drawn 
full-covenant  deeds.  They  are  the  covenant  of 
quiet  enjoyment,  by  which  the  grantor  promises 
that  the  grantee  and  his  heirs  may,  at  all  times, 
peaceably  and  quietly  use  and  enjoy  the  premises 
granted  without  the  molestation  of  any  person 
lawfully  claiming  the  same;  and  the  covenant  of 
further  assurance,  to  the  effect  that  the  grantor, 
his   heirs,   and   all   other  persons   deriving   any 


Real  Property  185 

interests  in  the  premises  through  them,  will 
furnish  any  other  and  further  conveyances  or 
assurances  of  title  which  the  grantee  or  his  heirs 
or  assigns  may  reasonably  require. 

It  appears  not  to  be  generally  desirable  that 
business  women  shall  tmdertake  considerable 
comprehensions  of  purely  legal  matters,  lest  they 
may  become  involved  in  the  mysteries  which  lead 
to  pettifoggery  or  to  litigiousness.  But  an  under- 
standing, sufficient  to  admit  of  at  least  a  casual 
application  of  the  simple  principles  which  have 
been  explained  in  this  chapter,  will  not  fail  to  be 
of  real  advantage.  It  will  not  be  necessary  for 
business  women  to  be  familiar  with  the  subtile, 
legal  reasons  which  underlie  the  apparently  ver- 
bose covenants  contained  in  deeds;  but  it  will 
often  be  of  great  benefit  to  them  if,  when  reading 
deeds  which  are  about  to  be  delivered  to  them, 
they  shall  be  able  to  assure  themselves  that  the 
covenants,  which  are  necessary  for  their  protection 
have  not  been  altogether  omitted. 


Ownership  of  Land. — Land,  being  the  original 
fountain-head  of  all  production,  must  necessarily 
be  the  original  source  of  all  income,  and  as  such 
a  source  of  income,  or,  in  other  words,  as  the 
security  for  certain  forms  of  investment,  it  may 
well  be  expected  to  fulfil  to  an  exceptional  degree 
all  the  requirements  of  the  rules  of  investment. 


1 86    The  American  Business  Woman 

Without  giving  here  the  details  of  such  a  proceed- 
ing, because  of  its  simplicity  and  the  ample 
illustration  of  it  which  has  been  given  in  the  pre- 
ceding pages  of  this  work,  it  may  be  remarked 
that  an  examination  of  the  general  rules  of  in- 
vestment, as  applied  to  the  ownership  of  real 
property,  will  at  once  result  in  a  full  realization  of 
such  natural  expectations. 

No  other  method  of  investment  has  ever  been 
able  so  completely  to  respond  to  the  most  exacting 
requirements  in  this  respect  as  does  real  prop- 
erty which  is  owned  and  controlled  by  the  single 
investor. 

A  minute  comparison  between  real  property, 
which  is  owned  by  investor,  and  mortgages  upon 
real  property  which  are  considered  by  many 
persons  to  be  superior  to  all  other  forms  of  in- 
vestment, will  result  rather  in  favor  of,  than  to 
the  disparagement  of,  the  former.  For  the  owner- 
ship of  real  estate  will  do  away  with  the  possibilities 
of  failures  of  foreclosure  proceedings,  which,  how- 
ever remote  and  improbable,  are  at  least  possible 
sources  of  danger  to  the  safest  mortgages.  So, 
also,  the  fact  that  the  older  the  investor's  title 
to  real  property  shall  become,  the  firmer  and  better 
it  will  become  (all  flaws  and  imperfections  being 
capable  of  obliteration  by  the  mere  lapse  of  time), 
well  accords  with  the  permanent  and  substantial 
character  of  the  security.  The  theory  that  it  will 
be  a  simpler  matter  to  turn  mortgages  quickly  into 


Real  Property  187 

money  than  real  property  which  is  owned  outright 
will  have  but  little  weight  with  the  true  investor; 
for  if  an  investment  shall  be  in  all  respects  a 
satisfactory  one,  there  will  be,  generally  speaking, 
no  desire,  on  the  part  of  the  investor,  for  such  a 
transformation.  And  further  it  may  be  assimied, 
with  every  appearance  of  reason,  that,  if  a  mort- 
gage upon  real  property  shall  have  at  all  times 
a  market  value,  quickly  to  be  realized,  similar 
qualities  must  attach  to  the  land  itself,  which  is 
the  source  and  reason  of  the  value  of  the  mort- 
gage. Indeed,  the  facts  that  investments  in 
mortgages  may  be  of  much  shorter  durations  than 
mortgagees  shall  desire,  and  that  such  investments 
may  be  terminated  with  scant  notices  to  the 
mortgagees,  will  constitute  arguments  which  will 
appeal  with  considerable  force  to  investors, 
and  which  will  again  resillt  to  the  advantage  of 
direct  ownership  of  real  property.  The  remaining 
argument — that  personal  property,  even  if  the 
particular  kind  shall  be  by  law  taxable,  may,  by 
the  oversight  of  or  the  deceiving  of  the  tax  officials, 
escape  taxation,  while  real  property  will  not  be 
capable  of  concealment  from  the  eyes  of  the 
assessors — should  not  be  considered  as  worthy  of 
notice,  since  it  belongs  only  to  investors  whose 
intentions  are  fraudulent  and  dishonest. 

The  direct  ownership  of  real  property  may,  there- 
fore, be  considered  to  be  the  most  advantageous 
general  form  of  investment. 


1 88    The  American  Business  Woman 

But  it  must  be  remarked  that  what  is  undoubt- 
edly true  in  general  may  be  precisely  the  contrary 
in  special  cases;  that  is,  there  are  special  conditions 
which  must  be  fulfilled  before  special  investments 
in  real  property  may  be  brought  to  the  maximum 
standard  of  the  general  rule. 

There  are  many  kinds  of  real  property,  varying 
greatly  in  all  essential  respects, — from  the  valu- 
able business  lot,  upon  which  may  stand  a  twenty- 
story  building  of  the  most  expensive  character, 
to  the  practically  worthless  swamp-lands  and 
barren,  inaccessible  mountain-lands  which  exist 
in  almost  all  countries.  Since  the  possession  of 
the  former  kind  will  be  practically  impossible  to 
the  majority  of  investors,  and  since  the  possession 
of  the  latter  kinds  will  be  undesirable  to  all 
investors  it  is  evident  that  somewhere  between 
these  limits  must  lie  the  various  kinds  of  real 
property  to  which  the  attention  of  investors  in 
general  must  be  chiefly  directed. 

There  are  two  general  purposes  for  which  man- 
kind seeks  to  own  and  control  real  property: 
first,  that  the  real  property  may  furnish  homes 
within  which  to  dwell,  and  second  that  the  real 
property  may  furnish  incomes  with  which  to  meet 
the  expenses  of  living.  In  a  broader  sense,  the 
former  purpose  may  be  considered  to  be  included 
in  the  latter,  since  every  ambitious  person  must 
either  own  a  home  or  hire  one,  and  the  ownership 
of  a  home  must  be  presumed  to  add  to  the  income 


Real  Property  189 

by  the  saving  of  rent  and  other  expenses  which 
are  incident  to  the  Hfe  of  a  lessee. 

Ownership  of  Homes. — With  regard  to  the 
former  of  these  purposes,  the  first  question  must 
be,  whether  or  not  it  will  be  of  advantage  to 
investors  generally  to  own  their  own  homes,  and 
if  so,  homes  of  what  kinds  and  descriptions. 
Whether  it  will  be  more  profitable  pecuniarily, 
and  more  beneficial  in  other  important  respects, 
to  be  the  absolute  owners  of  homes,  or  to  hire 
homes  of  other  owners;  and,  if  the  former  plan 
shall  be  decided  upon,  whether  homes  shall  be 
located  in  large  cities,  in  small  cities,  in  suburban 
villages,  or  in  purely  rural  districts;  and  whether 
homes  shall  be  luxurious  and  costly,  fashionable, 
moderate,  or  plain  and  simple — these  questions, 
and  others  of  like  natures,  have  at  times  engrossed 
the  attentions  of  nearly  every  prosperous  citizen, 
often  to  be  decided  in  such  a  manner  as  to  cause 
serious  future  regrets  and  inconvenience. 

From  the  point  of  view  of  actual  pecuniary 
benefit,  the  general  rule  appears  to  be  that  the 
ownership  of  a  home  possesses  advantages  over 
all  other  methods  of  providing  this  necessity; 
for  it  is  to  be  presumed  that  no  landlord  will 
rent  a  house  at  a  rental  which  shall  be  insufficient 
to  pay  all  necessary  expenses — interest  on  the 
money  invested,  taxes,  repairs,  insurance,  and 
sinking  fund — and,  if  possible,  an  additional  profit, 


iQo    The  American  Business  Woman 

unless  the  particular  premises  shall  happen  to  be  so 
undesirable  that  the  landlord  will  be  forced  to  ac- 
cept a  low  rental,  while  he  endeavors  diligently  to 
** unload"  his  bad  bargain  upon  some  unsuspecting 
or  inexperienced  person.  The  direct  and  indirect 
expenses  which  are  necessitated  by  frequent 
changes  of  residence,  the  possibilities  that  rentals 
maybe  increased  at  times  which  may  be  most  incon- 
venient for  tenants,  the  probabilities  of  unpleasant 
and  time-consuming  discussions  with  landlords 
or  their  agents  concerning  repairs  and  improve- 
ments, and  the  necessity  of  regularly  providing 
the  monthly  or-  quarterly  rents,  without  regard  to 
the  inconveniences  which  it  may  cause,  are  con- 
siderations upon  which  tenants  must,  indeed,  look 
with  apprehension  and  alarm;  while  the  tranquil 
home  owner  may  generally,  if  necessary,  postpone 
all  house  expenses,  save  the  comparatively  small 
one  of  taxes,  until  more  convenient  times. 

A  cormnon  objection  which  has  been  offered  to 
the  owning  of  homes,  is  the  fact  that  it  will  tend 
to  confine  the  owners  to  residence  in  the  localities 
where  the  homes  shall  he  situated.  In  certain 
cases  this  objection  may  be  real  and  tenable, 
while  in  others  it  will  prove  to  be  entirely  unim- 
portant. A  military  man  or  a  sailor  may,  perhaps, 
wisely  choose  not  to  own  a  home,  because  his 
occupation  may  require  that  he,  and  preferably 
his  family,  shall  reside  at  different  times  in  different 
places.     The  difficulty  of  disposing  of  a   home 


Real  Property  191 

upon  advantageous  terms,  or  the  alternative  of 
frequent  separations  from  family,  may  cause  such 
a  man  to  prefer  the  hired  home;  although  often, 
in  point  of  fact,  he  will  insist  upon  his  own  home, 
notwithstanding  these  objections.  Similarly,  it 
has  been  asserted  that  a  mechanic,  who  shall  be 
dependent  upon  his  trade  for  a  living,  should  not 
own  a  home,  for  the  reason  that  he  ought  to  be  at 
all  times  free  to  move  from  one  locality  to  another, 
as  may  be  most  advantageous  for  him,  on  accoimt 
of  his  trade.  If  an  artisan's  home  shall  be  wisely 
chosen  with  respect  to  location,  as  well  as  in  other 
important  respects,  it  will  be  difficult  to  discover 
good  reasons  why  he  should  have  extraordinary 
trouble  in  selling  or  renting  it,  if  it  shall  become 
necessary  or  desirable  for  him  to  change  the 
location  of  his  residence;  and  it  is  apparently 
certain  that  for  such  a  person  the  ownership  of  a 
home  which  has  been  badly  selected — for  example, 
in  a  small  village  which  is  entirely  supported  by 
a  single  industry — ^may  result  in  a  serious  loss. 
Thus,  it  appears  that  the  advisability  of  owning 
homes,  even  in  the  exceptional  cases  which  have 
been  cited  for  the  purposes  of  arguments  which  are 
unfavorable  to  such  ownership,  will  depend,  not 
upon  the  correctness  of  the  general  principle, 
but  upon  the  wisdom  and  the  discretion  with  which 
the  selection  of  homes  has  been  attended. 

For  such  persons  as  may  be  able  to  live  upon 
their  incomes  from  investments,  and  for  such  as 


192    The  American  Business  Woman 

may,  for  other  reasons,  be  in  positions  to  choose 
their  places  of  residence,  the  advantages  of  own- 
ing homes  must  be  generally  admitted;  and  the 
question  next  arising  will  be  concerning  the  con- 
siderations which  ought  to  be  made  use  of  when 
selecting  homes. 

To  persons  who  may  be  possessed  of  large 
incomes  and  of  ample  fortunes,  the  question  of  the 
selection  of  homes  will  become  principally  one  of 
personal  preference.  Such  persons  may  reside, 
during  the  winter  months,  in  costly  city  houses, 
and  during  the  summer  months  in  scarcely  less 
elegant  country  homes,  among  the  mountains,  by 
the  seashore,  or  elsewhere,  according  to  their 
individual  tastes.  But  to  persons  of  more  moder- 
ate means,  the  selection  of  homes  should  be 
accompanied  by  careful  considerations  of  all  con- 
ditions which  may  affect  the  homes,  not  only  as 
desirable  places  of  residence,  but,  to  a  certain 
limited  extent,  as  investments  in  real  estate. 

For  the  purposes  of  general  comparisons,  homes 
may  be  divided,  with  reference  to  location,  into 
three  classes:  first,  city  homes,  by  which  we  mean 
homes  which  are  situated  in  large  cities,  and  which 
have  all  the  regular  characteristics  pertaining  to 
such  homes;  second,  semi-rural  homes,  or  homes 
which  are  located  in  large  villages  or  small  cities; 
and,  third,  rural  homes,  that  is,  homes  which  are 
situated  in  small  villages  or  at  considerable  dis- 
tances from  cities  and  villages. 


Real  Property  193 

With  regard  to  the  cost  of  homes,  each  of  the 
three  classes  which  have  been  mentioned  may  be 
divided  into  three  classes,  namely:  costly  homes, 
moderate  homes,  and  simple  homes,  by  which 
terms  we  mean  homes  which  shall  be  costly, 
moderate,  or  simple  as  compared  with  the  average 
cost  of  homes  in  the  same  classes  with  reference 
to  location. 

In  the  selection  of  homes,  the  necessary  con- 
siderations may  be  very  differently  viewed  by 
different  persons;  a  consideration  which  to  one 
person  imder  certain  circumstances  will  be  of  the 
greatest  importance,  to  another  person,  imder 
different  circumstances,  may  be  of  very  little 
consequence.  Thus,  one  person  may  establish  a 
home  upon  a  purely  pecimiary  basis — as  an  in- 
vestment or  speculation,  to  be  maintained,  sold, 
exchanged,  or  leased,  according  as  will  be  most 
advantageous  from  a  pecuniary  standpoint;  an- 
other person  may  desire  chiefly  the  advantages  of 
society  and  amusement,  and  the  home  will  be 
chosen  with  these  objects  as  the  principal  con- 
siderations; another  may  regard  the  question  of 
general  healthfulness  as  the  all-important  consider- 
ation; and  still  another  may  locate  a  home  be- 
cause of  beauty  of  scenery  and  agreeableness  of 
climate. 

In  so  far  as  homes  are  to  be  considered  as  in- 
vestments in  real  estate,  the  rules  and  suggestions 
which  are  to  be  found  in  this  chapter,  and  in  the 
13 


194    The  American  Business  Woman 

preceding  chapters  of  this  work,  will  be  in  all 
respects  applicable.  But,  because  of  the  peculiar 
relation  which  the  home  must  bear  to  the 
investor,  other  considerations,  some  of  which  must 
be  permitted,  at  least  in  particular  cases  and 
to  a  limited  extent,  to  outweigh  the  regular  rules 
of  investment,  are:  general  comfort  and  conven- 
ience; preference  and  taste;  morality  of  particular 
vicinities;  climate;  healthf ulness ;  proper  society 
both  for  young  and  old;  accessibility  of  churches, 
schools,  physicians,  places  of  amusement,  stores, 
and  market-places. 

Probably  the  better  opinion  is  that  homes 
should  be  selected  without  other  strictly  pecuniary 
considerations  than  that  the  costs  shall  be  safely 
within  the  means  of  the  owners  and  that  the  owners 
shall  receive  fair  values  for  the  expenditures.  If, 
however,  it  shall  be  decided  that  homes  must  be 
capable,  at  all  times,  of  being  disposed  of  with  little 
or  no  losses,  the  order  of  desirability  of  classes  may 
be  stated  as  follows: 

(i)  Simple  city  homes, 

(2)  Moderate  city  homes, 

(3)  Costly  city  homes, 

(4)  Simple  semi-rural  homes, 

(5)  Moderate  semi-rural  homes, 

(6)  Simple  rural  homes, 

(7)  Moderate  rural  homes, 

(8)  Costly  semi-rural  homes, 

(9)  Costly  rural  homes. 


Real  Property  19S 

City  homes  will  generally  possess  the  advantages 
of  modem  conveniences — society,  churches,  schools, 
amusements,  etc. — over  semi-rural  homes,  and  to 
a  far  greater  extent  over  rural  homes;  while 
coimtry  homes  will  have  the  advantages  of  pure 
air,  general  healthfulness,  freedom  from  noise  and 
disturbance,  and  the  tranquil  pleasures  of  simimer 
life  among  the  trees,  fields,  and  flowers,  no  less 
than  to  many  persons,  the  brisk  and  invigorating 
delights  of  snow-covered  hills  and  frozen  streams. 

After  a  careful  study  of  circumstances,  in  each 
particular  case,  it  seems  that  the  home  which  will 
combine  the  greatest  number  of  advantages  with 
the  least  number  of  disadvantages  will  prove  to 
be  one  ranking  among  the  best  of  moderate  houses, 
having  a  reasonable  amount  of  grounds  and  garden, 
and  situated  in  or  near  a  village  or  small  city,  of 
from  four  thousand  to  ten  thousand  population, 
and  being  from  twenty  to  fifty  miles  from  one  of 
the  principal  cities  of  the  country. 

With  regard  to  the  actual  safe  cost  of  homes  for 
incomes  of  given  amounts,  or  the  proportions  of 
principals  which  may  be  safely  invested  in  homes, 
the  general  rule  may  be  to  devote  one  tenth  of 
working  or  income-producing  principals  to  the 
establishment  of  homes.  Otherwise  expressed, 
the  cost  of  the  home  may  be  equal  to  the  sum  of 
two  years'  regular  income.  A  person  having  a 
principal  of  fifty  thousand  dollars,  and  an  income 
of   twenty-five  hundred   dollars  per  year,   may 


196    The  American  Business  Woman 

therefore  expend  the  sum  of  five  thousand  dollars 
upon  a  home;  a  person  having  a  principal  of  two 
himdred  thousand  dollars,  and  a  yearly  income 
of  ten  thousand  dollars,  may  enjoy  the  blessings 
of  a  home  which  shall  cost  twenty  thousand  dollars ; 
and  a  millionaire,  having  an  income  of  fifty 
thousand  dollars  per  year  may  own  a  home  which 
shall  cost  one  hundred  thousand  dollars. 

In  the  majority  of  cases  it  is  believed  that  this 
rule  will  be  found  to  give  satisfactory  results. 
But  there  are,  manifestly,  special  cases  in  which 
it  will  not  apply  at  all.  For  example,  persons 
having  very  small  principals,  and  dependent  upon 
their  labors  for  livings,  will,  by  the  rule,  be  re- 
stricted to  entirely  inadequate,  or  even  impossible 
homes,  while  persons  who  may  be  worth  many 
millions  will  be  entitled  to  homes  of  unreasonable 
extravagance.  A  person  having  a  principal  of 
two  thousand  dollars,  and  attempting  to  establish 
a  home  for  the  small  sum  of  two  hundred  dollars, 
will  certainly  become  involved  in  an  absurd  task; 
and  a  person  who  shall  possess  a  fortune  of  a  hun- 
dred millions,  and  who  shall  expend  the  sum  of 
ten  millions  of  dollars  upon  a  home,  may  be  con- 
sidered to  have  acted  almost  the  part  of  a  madman. 
In  the  one  case,  the  entire  principal,  under  proper 
conditions,  may  be  expended  in  providing  a  home ; 
and  in  the  other  case  a  small  proportion  of  the 
amount  which  will  be  allowed  by  the  rule  will  be 
sufficient  to  provide  every  proper  luxtiry  for  the 


Real  Property  197 

home  of  a  person  who  may  be  possessed  even  of  so 
great  a  fortune. 

Homes  shoiild  be,  in  all  possible  cases,  free  and 
clear.  Whatever  may  be  the  complicated  nature 
of  outside  investments  and  speculations,  no  matter 
what  risks  and  chances  we  may  be  willing  to 
assume  in  ordinary  transactions,  let  us  take  no 
risks  with  our  homes.  Let  us  mortgage  and 
incumber,  if  there  shall  be  no  help  for  it,  every 
other  kind  of  property ;  but  let  no  mortgage  hang, 
like  a  gloomy  cloud,  above  that  gentle  refuge 
from  all  risks  and  chances — the  one  spot  safe  and 
secure — the  home. 

Homestead  Acts. — ^The  necessity  for  assuring, 
in  a  certain  degree,  the  permanence  of  homes, 
has  caused  the  various  States  of  our  country 
to  enact  laws  the  general  effect  of  which  is  to 
exempt  homes  from  sale  under  executions  for  the 
collection  of  debts.  These  laws,  known  as  the 
homestead  acts  differ  somewhat  in  the  different 
States;  but  the  general  effect  is  to  declare  that 
homesteads,  occupied  by  the  owners  and  their 
families,  and  limited  to  values  varying  from  a  few 
hundred  dollars  to  several  thousand  dollars,  or 
limited  by  the  allowed  area  of  the  lands,  shall  be 
exempt  from  judicial  sale  for  the  collection  of 
debts  during  the  lifetime  (or  widowhood)  of  the 
widow  and  during  the  minority  of  the  children. 
The  theory  of  the  legally-exempt  homestead  is 


198    The  American  Business  Woman 

that  it  shall  be  a  sure  home  during  the  life  of  the 
family — a  home  belonging  to  the  husband,  the 
wife,  and  all  the  children.  Therefore,  in  many 
of  the  States,  homesteads  cannot  be  sold  or 
mortgaged  except  by  the  consent  of  the  whole 
family,  the  husbands  and  the  wives  (as  the 
representatives  of  the  children)  being  required  to 
join  in  the  execution  of  the  deeds. 

In  some  States,  the  right  of  exemption  under  the 
homestead  acts  may  be  claimed  by  the  proper 
parties,  as  a  matter  of  course,  without  any  special 
precedent  act ;  while  in  other  States  it  is  necessary 
either  that  the  deed  which  conveys  the  home  shall 
declare  that  the  premises  are  to  be  used  as  a 
homestead  under  the  statutes  of  exemption,  or  that 
the  owner  shall  record  in  the  proper  public  office 
a  declaration  to  the  same  effect. 

The  small  values  to  which  exempt  households 
are  generally  limited  (probably  one  thousand 
dollars  is  more  general  than  any  other  amount) 
have  resulted  in  the  gradual  decrease  in  the 
nimiber  of  such  homesteads  in  the  well-settled 
States,  as  the  general  values  of  real  property  have 
increased.  In  most  of  the  large  cities  exempt 
homesteads  are  practically  unknown  at  the 
present  time. 

Building  Loan  Associations. — ^Within  recent 
years,  there  have  become  common  in  many  of 
the  States  certain  corporations,  called  variously 


Real  Property  199 

Building  Loan  Associations,  Mutual  Loan  Associa- 
tions, Co-operative  Loan  Associations,  etc.,  whose 
avowed  purpose  is  the  encouraging  of  savings 
and  the  building  of  homes.  More  or  less  compli- 
cated methods  of  subscribing  for,  paying  for,  and 
pledging  shares,  and  of  bidding  for  loans  to  be 
secured  by  bonds  and  mortgages,  or  by  pledged 
shares,  or  both,  are  provided  for  by  the  statutes 
of  the  different  States,  and  by  the  regulations  and 
by-laws  of  the  corporations.  Briefly  described, 
and  without  unnecessary  attention  to  details,  the 
theory  of  these  corporations  appears  to  be  that 
they  are  at  once  a  means  of  safe  and  advanta- 
geous investment  for  their  members,  and  a  means 
of  easy  and  advantageous  borrowing  also  by  the 
members — that  one  member  may  safely  invest 
money,  at  satisfactory  rates  of  interest,  in  the 
shares  of  such  a  corporation,  while  another  member 
may  easily  borrow,  at  satisfactory  rates,  of  the 
funds  which  the  first  member  has  invested. 
Evidently  such  a  claim  must  be  absurd;  for  if 
the  investor  shall  loan  money  at  high  rates  of 
interest,  the  borrower  must  pay  the  high  rates, 
and,  inversely,  if  the  borrower  shall  pay  low  rates 
of  interest  for  a  loan  of  money  the  investor  will 
receive  only  low  rates. 

Associations  of  this  kind  are  sometimes  ex- 
empted by  the  statutes  from  the  effects  of  the 
usury  laws;  this  fact,  together  with  other  results 
of    general    investigations,    must     lead    to    the 


200    The  American  Business  Woman 

conclusion  that  the  borrowing  members  must  pay- 
rates  of  interest  which  are  higher  than  the  usual 
rates,  and  also  that  other  charges  may  cause  the 
actual  rates  which  must  be  paid  to  exceed  the 
legal  rates. 

Corporations  of  this  kind  have  been  of  con- 
siderable apparent  benefit  in  the  building  up  of 
cities  and  villages.  They  have  also  probably 
been  the  means  of  increasing  the  number  of  homes 
which  are  owned,  at  least  nominally,  by  those 
who  occupy  them.  They  undoubtedly  afford 
quick  facilities  for  borrowing  money,  and  by  their 
circulars  and  notices  may  often  suggest  the  owning 
of  homes  to  those  who  would  otherwise  never 
own  their  homes.  For  these  reasons,  corpora- 
tions and  associations  of  this  kind,  honestly 
managed,  are  fairly  entitled  to  the  credit  of  being 
generally  beneficial ;  and  it  is  far  from  the  purpose 
or  wish  of  the  author  in  any  way  to  disparage 
them.  But  the  fact  of  the  matter  must  be  that 
homes  which  shall  be  established  by  means  of 
these  associations  will  be  among  the  most  costly 
for  the  values  which  will  be  received. 

For  persons  of  some  means  there  will  be  no 
necessity  of  recourse  to  borrowed  funds  for  the 
building  of  homes.  But  for  those  who  may  have 
little  or  no  means,  the  question  whether  it  will 
be  more  advantageous  to  build  homes  before 
they  can  be  paid  for,  and  to  pay  taxes,  and  prin- 
cipals and  interest  of  mortgages  until  the  homes 


Real  Property  201 

may  be  made  free  and  clear,  or  to  pay  rent  for 
homes  until  such  times  as  permanent  homes  may 
be  acquired  and  paid  for,  will  be  of  no  little 
importance. 

The  theoretically  and  sentimentally  correct 
process  of  establishing  an  independent  home  out 
of  the  simple  elements  of  good  health,  industry, 
economy,  and  steady  savings  may  be  described 
as  follows : 

Starting  out  in  the  family  life,  with  none  of 
the  elements  of  success  except  those  which  have 
been  mentioned,  the  family  must  labor  and 
economize  rigidly  in  every  possible  direction, 
without  false  pride  or  unreasonable  haste,  living 
in  poor  houses  for  the  sake  of  low  rents,  eating 
cheap  food,  wearing  cheap  clothing,  and  investing 
all  savings  with  strict  caution  and  promptness 
until  such  time  as  a  small,  cheap  house,  but  such 
as  is  capable  of  future  enlargement  and  improve- 
ment, may  be  secured  and  entirely  paid  for.  The 
process  must  then  continue  as  before,  under  some- 
what easier  and  better  conditions. 

At  future  times,  as  the  results  of  the  self- 
denial  and  prosperity  of  the  family  shall  become 
greater,  such  a  home  will  be  beautified  and  im- 
proved, until  it  becomes,  in  all  respects,  sufficient 
— a  comfortable,  beautiful,  independent  home, 
every  part  of  which  will  be  hallowed  to  the 
family  by  which  it  has  been  so  faithfully  earned. 
Such  is  the  perfect  process  of  home-making.     It 


202    The  American  Business  Woman 

follows  perfectly  from  all  the  correct  principles  of 
family  economics  and  of  investment.  It  will 
lead  no  person  beyond  his  means;  it  will  take  no 
risks  of  loss;  it  will  require  no  struggle  to  meet 
improper  expenses ;  and  it  will  lead  always  steadily 
and  surely  up  to  the  desired  end. 

Unfortunately,  perhaps,  such  an  old-fashioned 
course  as  has  been  described  ill  suits  the  modern 
spirit  of  haste  and  unrest.  Nevertheless,  it  will 
prove  to  be  well  worth  the  while,  if  those  who 
shall  contemplate  the  owning  of  homes  by  means 
of  imagined  quick  methods,  shall  put  to  them- 
selves, with  deep  earnestness,  one  pertinent 
question — do  these  corporations  for  the  building 
of  homes  commonly  own  houses  which  have  been 
obtained  through  foreclosures?  Every  house  thus 
owned  must  represent  one  failure  of  the  modem 
method — one  family  whose  dearest  hopes  have 
been  blasted — one  ruined  home. 

Purchasing  Real  Property. — We  come  now  to 
the  consideration  of  real  property  as  the  security 
for  direct  investments,  or  for  the  purposes  only  of 
securing  principals  and  of  furnishing  incomes. 

At  the  outset,  it  must  be  remarked  that  the 
judicious  purchasing  of  real  estate  will  not  always 
be  a  simple  matter.  It  will  always  require  careful 
study,  caution,  and  independent  judgment,  if  not 
experience.  Therefore,  if  one  shall  be  fortunate 
enough  already  to  possess  real  estate  which  shall 


Real  Property  203 

return  a  fair  and  regular  income,  which  shall 
show  no  tendency  to  decrease  in  value,  but,  on  the 
contrary,  shall  steadily  increase  in  value,  if  ever 
so  slowly,  year  by  year  (or  shall  decrease  in 
value  only  because  of  the  poor  character  of 
buildings  which  may  be  advantageously  replaced 
by  new  and  better  ones)  all  temptations  to  dis- 
pose of  the  real  estate  for  the  purpose  of  making 
better  investments  should  be  steadfastly  resisted, 
and  the  substantial  investment  should  be  in  no 
wise  interfered  with. 

In  real  estate  matters,  to  a  very  marked  degree, 
will  the  time-honored  recommendation  to  leave 
well  enough  alone  prove  to  be  applicable;  es- 
pecially will  this  be  true  under  the  somewhat 
difficult  conditions  of  investment  which  prevail 
generally  at  the  present  time. 

The  difficulties  which  will  be  met  with  in  the 
purchasing  of  real  estate  must  not  be  under- 
estimated, nor  should  they  be  considered  so 
great  as  to  place  this  safest  of  all  kinds  of 
investment  beyond  the  attainment  of  properly 
instructed  business  women.  For  the  difficulties 
may  be  overcome  without  unreasonable  task, 
and,  when  once  mastered,  the  art  of  investing 
in  real  estate  will  furnish  ample  rewards  for 
the  time  and  patience  which  may  have  been 
consumed  in  the  learning  of  it. 

An  examination  of  the  conditions  and  circum- 
stances of  the  land  itself  which  are  necessary  for 


204    The  American  Business  Woman 

satisfactory  investments  in  mortgages  has  been 
given  in  the  preceding  chapter,  for  the  reason 
that  mortgages  must  always  anticipate  the  possi- 
bility of  owning  the  mortgaged  premises.  The 
considerations  which  have  been  there  mentioned 
must  be  thoroughly  satisfied  in  investments  in 
which  real  estate  shall  be  purchased  by  the  in- 
vestors. If  any  distinction  in  this  respect  is  to  be 
made  between  the  two  forms  of  investments,  in- 
vestors should  make  use  of  even  greater  care  when 
purchasing  real  estate  than  when  loaning  money 
upon  mortgages ;  for  in  the  former  case,  the  chances 
of  receiving  back  again  the  amounts  which  have 
been  invested,  without  the  necessity  of  owning 
the  securities,  will  be,  of  course,  entirely  out  of 
the  question. 

For  the  sake  of  avoiding  unnecessary  repetition, 
it  will  be  sufficient  to  remark  that,  in  all  kinds 
of  real  estate  transactions,  the  preceding  chapter, 
the  chapter  upon  the  general  principles  of  in- 
vestment, and  the  present  chapter  must  be  read 
in  connection  the  one  with  the  others,  regarding 
either  as  supplementary  to  the  others. 

The  present  chapter,  in  the  main,  must  be 
devoted  to  the  examination  of  facts  and  condi- 
tions which  apply  so  exclusively  to  the  ownership 
of  real  estate  as  not  to  have  been  suggested  in  the 
preceding  pages. 

Condemnation  of  Land. — In  the  words  of 


Real  Property  205 

the  New  York  statute:  "The  people  of  this  State, 
in  their  right  of  sovereignty,  are  deemed  to  possess 
the  original  and  ultimate  property  in  and  to  all 
lands  within  the  jurisdiction  of  the  State;  and 
all  lands,  the  title  to  which  shall  fail  from  a  defect 
of  heirs,  shall  revert  or  escheat  to  the  people"; 
and  the  same  rule,  in  effect,  exists  in  the  different 
States  of  the  Union. 

The  practical  effect  of  these  laws  is  that  every 
owner  of  lands  holds  title  to  the  lands,  subject  to 
the  right  of  the  State  within  which  the  lands  shall 
be  situated,  to  pass  laws  which  shall  govern  the 
uses  of  the  lands;  to  tax  the  lands;  and  to  take 
possession  of  the  lands,  upon  payment  of  legally- 
determined  compensations,  and  otherwise  com- 
plying with  the  laws,  for  certain  partictilar  uses 
(such  as  roads,  public  parks,  public  buildings,  etc.) 
which  are  considered  to  be  necessary  for  the 
welfare  of  the  general  public. 

The  last-mentioned  right  of  the  State  in  private 
lands  is  called  the  right  of  eminent  domain. 
States  have  the  power,  under  the  laws,  to  delegate 
the  right  of  eminent  domain  to  certain  other 
parties,  such  as  municipal  corporations  (cities, 
counties,  villages,  etc.),  railroad  corporations,  etc., 
in  order  to  enable  them  to  obtain,  at  fair  and 
reasonable  prices,  lands  which  otherwise  they 
might  not  be  able  to  obtain  at  all,  or  at  least 
only  by  the  payment  of  exorbitant  prices,  and 
which    are    necessary    to     them    for    purposes 


2o6    The  American  Business  Woman 

which  are  presumed  to  be  for  the  benefit  of  the 
public. 

The  legal  process  of  taking  private  lands  for 
public  uses,  under  the  laws  of  eminent  domain, 
which  process  is  called  the  condemnation  of  land, 
may  be  generally  described  as  follows:  The 
necessity  for  the  condemnation  having  been 
determined,  the  condemning  corporation  notifies 
the  land-owners  of  the  proceeding  (by  adver- 
tisements in  the  newspapers,  by  forwarding  the 
notices  through  the  mails,  or  by  personal  service 
upon  the  owners — usually  the  former),  and  by 
application  to  the  courts  obtains  the  appointment 
of  commissioners  for  the  purpose  of  fixing  the 
prices  which  must  be  paid  for  the  lands  which  are 
to  be  taken.  If  the  proceeding  shall  not  be 
contested  by  the  owners,  the  amounts  which  shall 
be  fixed  upon  and  awarded  by  the  commissioners 
will  be  paid  to  the  owners  or  deposited  in  the 
banks  or  trust  companies  designated  by  law  for 
such  purposes,  and,  upon  the  order  of  the  court, 
the  title  to  the  lands  will  pass  to  the  condemning 
corporation.  If  the  owners  shall  wish  to  contest 
the  proceedings,  the  laws  of  the  various  States 
provide  methods  of  trial,  by  means  of  which  the 
fair  values  of  the  lands  which  are  sought  to  be 
condemned  may  be  determined  by  courts  and 
juries;  methods  of  appeal  from  erroneous  deter- 
minations of  courts  or  juries  are  also  provided. 

With  regard  to  the  right  of  eminent  domain, 


Real  Property  207 

the  Constitution  of  the  United  States  provides 
simply  that  private  property  shall  not  be  taken 
for  public  uses  without  just  compensation,  leaving 
the  necessary  legislation  in  other  respects  to  the 
various  States. 

Adverse  Possession. — Adverse  possession  is 
the  right  which  a  stranger  has  to  acquire  the 
title  to  real  estate  belonging  to  another  by  simply 
occupying  and  claiming  it  without  right,  for  a 
certain  period  of  years,  which  is  declared  by  the 
laws  of  the  State  within  which  the  real  estate 
shall  be  situated  to  be  sufficient  for  the  purpose. 
The  true  construction  of  the  law,  with  regard 
to  the  acquiring  of  titles  by  adverse  possession, 
should  be  that  the  use  and  occupation  which  are 
required  to  divest  the  true  titles  must  be  actual, 
continuous,  open,  adverse,  and  notorious  to  such 
an  extent  as  to  raise  the  presumptions  that  the 
squatters  shall  intend  to  claim  the  lands,  in  spite 
of  the  real  owners,  and  that  the  real  owners  shall 
not  intend  to  oppose  them.  But,  as  a  matter 
of  fact,  the  laws  of  some  of  the  States  appear 
actually  to  favor  the  land  thieves.  While  the 
general  rule  of  law  is  that  an  occupation  of  land 
for  a  period  of  twenty  years  will  be  necessary 
before  squatters  may  obtain  good  titles,  the  laws 
of  some  of  the  States  require  much  shorter  periods 
of  occupation.  So  the  evidence  of  the  necessary 
occupation  may  be  made  diffictilt  or  simple  by 


2o8    The  American  Business  Woman 

the  laws;  the  manner  of  occupations  which  shall 
be  required  may  favor  squatters  by  allowing 
them  to  claim  titles  to  large  tracts  of  land  while 
they  actually  occupy  and  use  only  small  portions, 
or  by  construing  the  erection  of  shanties  which 
may  be  only  occasionally  visited  as  sufficient 
occupations;  and  the  laws  may  be  such  as  to 
allow  courts  and  juries  generally  to  favor  resident 
squatters,  to  the  injury  of  rightful  non-resident 
owners. 

Owners  of  real  estate  which  shall  be  liable  to 
such  acts  of  injustice  will  do  well  to  dispose  of 
their  lands  at  the  first  propitious  opportunities; 
and,  while  awaiting  the  opportunities,  the  lands 
may  be  frequently  and  thoroughly  surveyed  by 
the  owners  and  witnesses,  careful  memoranda 
being  made  of  the  visits,  in  anticipation  of  any 
claims  which  may  be  made  by  squatters  against 
the  true  titles  to  the  lands. 


Present  AND  Prospective  Margins  of  Safety. 
— Recurring  now  to  the  general  principles  of 
investment,  it  will  be  remembered  that  the  first 
consideration  concerning  an  investment  is,  that 
it  shall  be  as  nearly  as  possible  absolutely  safe, 
for  which  consideration  two  requisites  have  been 
stated:  namely,  that  there  shall  be  a  real  and 
ample  security,  and  that  the  security  shall  be 
within  the  control  of  the  investor;  the  second  and 


Real  Property  209 

remaining  consideration  being  that  the  investment 
shall  return  a  fair  and  regular  income. 

These  invariable  niles  must  now  be  applied  to 
investments  in  the  form  of  real  estate  which  shall 
be  owned  by  investors. 

With  reference  to  the  first  requisite  of  safety, 
it  will  be  observed  that  a  marked  difference 
exists  between  investments  which  are  in  the 
nature  of  loans  (of  which  the  mortgage  upon 
real  estate  is  to  be  regarded  as  the  highest  type) 
and  investments  in  which  the  securities  shall  be 
purchased  by  the  investors  (of  which  the  owner- 
ship of  real  property  is  to  be  regarded  as  the 
highest  type),  in  the  matter  of  the  margin  of 
safety,  the  general  principles  of  which  have  been 
fully  explained  in  preceding  chapters. 

In  the  former,  or  loan-investments,  the  margin 
of  safety  is,  in  the  main,  although  subject  to  some 
variation,  a  fixed  and  definite  quantity,  while  in 
the  latter,  or  purchase-investments,  this  margin 
may  be  great,  small,  altogether  wanting,  or, 
indeed,  instead  of  a  margin  of  safety,  there  may 
be  a  margin  upon  the  wrong  side.  Thus,  in  the 
case  of  a  mortgage  upon  real  estate,  the  margin 
of  safety  is,  it  will  be  remembered,  the  difference 
between  the  actual  value  of  the  real  estate  and 
the  amount  of  the  mortgage  (always,  it  must  be 
presumed,  in  favor  of  the  investor);  in  the  pur- 
chase-investment in  real  estate  the  present  margin 
of  safety   is  the   difference  between   the  actual 


^lo    The  American  Business  Woman 

value  and  the  cost  of  real  estate,  which  difference 
will  exist  to  the  advantage  of  the  owner  only  in 
the  case  of  what  is  commonly  called  a  good 
bargain. 

If  real  estate  shall  be  purchased  at  less  than 
its  actual  value,  there  will  be  a  present  margin 
of  safety;  if,  as  is  more  apt  to  be  the  case,  the 
value  of,  and  the  price  which  shall  be  paid  for, 
real  estate  shall  be  the  same,  there  will  be  no 
present  margin  of  safety ;  and  if  the  cost  of  the 
real  estate  shall  be  greater  than  the  actual  value 
there  will  be  a  negative  margin,  or  a  margin  upon 
the  wrong  side — a  margin  of  danger,  rather  than 
a  margin  of  safety. 

Since  we  cannot  always  calculate  upon  the 
piirchasing  of  good  real  estate  at  less  than  its 
real  value,  it  is  plain  that,  in  the  majority  of 
cases,  the  required  margin  of  safety  must  be 
provided  in  some  other  manner  than  the  difficult 
seeking  after  exceptional  bargains.  Good  bar- 
gains in  real  estate  are,  at  certain  times,  to  be 
obtained  in  manners  which  will  shortly  be  ex- 
plained; but  such  opportunities  must  be  regarded 
as  exceptional,  and  as  requiring  special  conditions 
which  are  not  often  easily  to  be  fulfilled. 

Properly  selected  real  estate  will  almost  in- 
variably increase  in  value  year  after  year,  until 
a  final  maximum  limit  shall  be  reached;  and  this 
limit,  in  the  best  kinds  of  real  estate,  will  often 
be  maintained  indefinitely  when  once  attained. 


Real  Property  211 

The  increases  in  the  values  of  real  estate  will  be 
widely  different  in  different  cases;  in  some  cases, 
the  increase  will  be  slow  and  regular,  in  others 
rapid  and  irregular.  Nevertheless,  real  estate, 
if  wisely  selected,  and  purchased  under  proper 
conditions,  will  seldom  fail,  in  the  long  run,  to 
increase  materially  in  actual  value. 

The  increases  in  values,  then,  must  be  gener- 
ally relied  upon  to  furnish  the  necessary  margin 
of  safety ;  or,  in  other  words,  there  must  be  either 
an  actual  present,  or  a  sure  future,  or  prospective 
margin  of  safety ;  and  the  perfect  purchase-invest- 
ment will  be  that  in  which  both  of  these  margins 
will  eventually  appear.  The  requisite  which  is 
now  under  consideration,  as  applied  to  real-estate 
investments,  will  therefore  suggest  the  first 
general  rule  for  the  purchasing  of  real  estate; 
to  wit :  the  real  estate  must  possess  either  a  present 
or  a  prospective  value  which  shall  be  greater  than 
the  actual  cost. 

In  order  to  purchase  real  estate  at  less  than 
its  actual  value,  it  will  be  necessary,  first  of  all, 
that  the  property  shall  be  paid  for  in  cash.  Real 
bargains  in  real  estate,  like  other  real  bargains, 
are  not  to  be  obtained  on  credit ;  for  the  strongest 
incentive  which  may  force  one  to  sell  his  property 
at  a  low  price  will  be  the  necessity  for  money  for 
immediate  use,  and  in  general  no  amount  of 
credit  or  seciurity  will  serve  as  a  substitute  in 
such  a  case. 


212    The  American  Business  Woman 

The  only  safe  general  rule  with  regard  to  the 
exchanging  or  trading  of  real  estate  will  be  that 
exchanges  shall  be  entirely  avoided.  If  an  in- 
vestor shall  have  become  possessed  of  a  bad  in- 
vestment in  real  estate,  as  a  general  rule  it  will 
prove  more  advantageous  in  the  end  to  dispose 
of  the  real  estate  at  a  low  figure,  than  to  endeavor, 
by  a  succession  of  exchanges,  to  get  out  of  the 
difficulty  without  loss.  Desirable  real  estate  can 
almost  always  be  sold  for  cash,  and  only  bad 
bargains  are  offered  for  exchange. 

Indeed,  so  large  a  proportion  of  exchanges  restilt 
disastrously  that  there  seems  to  be  a  certain 
warrant  for  the  facetious  theory  that  an  exchange 
of  property  is  the  only  practice  in  which  there  is 
a  possibility  that  both  parties  to  the  transaction 
may  be  cheated.  None  but  the  most  skilful  and 
experienced  dealers  in  real  estate  can  afford  to 
indulge  in  exchanges;  the  many  suggestions  of 
the  real-estate  brokers  with  regard  to  advan- 
tageous exchanges,  may,  therefore,  be  safely 
disregarded,  upon  the  general  ground  that  their 
opinions  will  be  prejudiced  in  favor  of  exchanges 
by  the  double  commissions  which  sometimes 
accompany  such  transactions. 

In  general,  real  estate  vshotdd  be  purchased 
only  in  times  of  business  depression;  and  prefer- 
ably, it  is  evident,  at  a  period  in  a  time  of  depres- 
sion when  values  of  almost  all  kinds  of  property 
shall  have  reached  their  lowest  points.     Such  a 


Real  Property  213 

proceeding  will  not  always  be  easy  of  accom- 
plishment, for  the  reason  that  the  lowest  values 
which  will  be  reached  are  not  always  to  be  cor- 
rectly determined  in  advance  without  the  exercise 
of  judgment  and  watchfulness,  if  not  of  special 
ability.  But  the  following  suggestions  will  serve 
to  indicate  the  reasoning  by  which  such  determina- 
tions may  be  made:  Long  periods  of  profitless 
business  always  brings  general  depressions  of 
values,  for  the  sufficient  reason  that  there  are, 
at  such  times,  many  who  need  money,  and  there- 
fore must  sell  their  property,  and,  at  the  same 
time,  few  who  have  the  available  money  to 
invest — in  other  words,  the  supply  will  exceed 
the  demand,  and  a  fall  in  prices  must  follow.  In 
accordance  with  the  adage  to  the  effect  that  we 
must  go  against  the  current  if  we  wish  to  catch 
the  driftwood,  a  simple  rule  with  regard  to  the 
handling  of  real  estate  will  be  to  buy  when  others 
wish  to  sell,  and  to  sell  (if  at  all)  when  others 
wish  to  buy. 

It  has  been  said  that  periods  of  depression  occur 
generally  at  intervals  of  about  fifteen  years' 
duration,  and  extend  through  periods  of  from 
three  to  five  years;  an  investigation  of  the  facts 
will  show  that  this  statement  is  not  farther  from 
the  truth  than  statements  of  such  a  general 
nature  usually  are. 

A  serious  difficxilty  in  following  out  the  rule 
to  purchase  real  estate  only  in  times  of  depression, 


214    The  American  Business  Woman 

will  be  the  general  inability  to  obtain  cash  money 
at  such  times.  Mortgages  which  are  due  cannot 
be  called  in,  even  if  such  a  course  shall  be  desirable ; 
for  the  general  dearth  of  money  will  render  it 
difficult,  if  not  impossible,  for  mortgagors  to 
obtain  the  money  with  which  to  pay  off  their 
mortgages.  Real  estate  cannot  be  turned  into 
cash;  for  to  sell  real  estate  at  such  times,  in  order 
to  p\irchase  other  real  estate,  will  evidently  be 
absurd.  The  practical  way  out  of  this  difficulty 
is  to  avoid  it  entirely  by  preparing  for  a  period 
of  depression  before  it  shall  arrive.  While  all 
kinds  of  business  are  in  flourishing  conditions, 
while  prosperity  and  success  are  to  be  met  with 
upon  every  side,  while  enterprises  and  industries 
are  ever^^where  thriving,  and  no  thought  of 
adversity  exists,  the  sagacious  investor,  whose 
independent  judgment  is  uninfluenced  by  the 
rush  and  excitement  of  the  masses,  and  who  well 
knows  that  over-production,  excessive  specula- 
tion, high  values,  and  "booms"  are  the  sure 
forerunners  of  business  crashes,  and  subsequent 
depressed  values,  will  quietly  lay  aside  the  cash 
which  will  soon  perform  for  him  grand  services, 
when  the  speculators  and  "boomers'*  shall  be 
silent  and  crushed. 

Real  estate  may  be  purchased  more  advan- 
tageously from  owners  who  are  anxious  to  sell 
than  from  those  who  will  require  urging;  for  the 
only  effective  urging  in  such  cases  will  be  the 


Real  Property  215 

offering  of  tempting  prices,  and  investors  must 
see  to  it  that  the  prices  which  shall  be  offered 
by  them  shall  be  tempting  because  they  are  cash 
prices,  not  because  they  are  exceptionally  high. 
Therefore,  no  anxiety  must  be  manifested  on  the 
part  of  proposed  purchasers.  After  deciding  upon 
the  desirability  of  certain  pieces  of  real  estate, 
their  values  should  be  fixed  upon;  and  prices 
somewhat  lower  than  the  investors  shall  be  willing 
to  pay,  and  determined  upon  without  reference 
to  the  prices  which  may  be  asked  for  the  premises, 
may  be  offered,  with  the  understanding  that  the 
offers  are  for  cash,  to  be  paid  in  full  at  the 
passing  of  the  titles. 

As  a  general  rule,  vacant  or  unimproved  real 
estate  will  be  the  first  kind  to  feel  the  effects  of 
hard  times,  because  the  expense  of  keeping  such 
property,  and  the  lack  of  income  from  it,  will 
cause  it  soon  to  become  burdensome.  For  similar 
reasons,  heavily  mortgaged  real  estate  will  be 
found  early  on  the  market  in  times  of  depression. 
Improved  free  and  clear  property,  on  the  other 
hand,  will  often  carry  itself  through  long  periods 
of  depression  with  no  greater  inconvenience  to 
the  owners  than  considerable  reductions  in  the 
rentals. 

Auction  sales  may  prove  to  be  advantageous 
mediums  for  the  purchasing  of  real  estate,  for 
they  are  sometimes  the  means  of  putting  upon 
the  market  valuable  properties   which   may  be 


2i6    The  American  Business  Woman 

offered  for  sale  only  because  there  are  special 
circumstances  which  practically  compel  a  re- 
course to  such  quick  and  simple  methods.  When 
purchasing  real  estate  at  auction  sales,  however, 
the  exact  values  of  the  properties,  the  actual 
reasons  for,  or  causes  of  the  sales,  and  the  general 
and  particular  natures  and  conditions  of  the 
premises  and  their  surroundings,  should  be 
thoroughly  tmderstood. 

The  amounts  of  rentals,  taxes,  insurance,  and 
other  expenses  being  once  ascertained,  the  calcu- 
lation by  means  of  which  the  present  quality 
of  an  investment  in  improved  real  estate  is  to 
be  determined,  will  be  a  simple  one;  for  the  in- 
vestor has  only  to  obtain,  from  these  data,  the 
net  returns  from  the  property,  over  all  expenses, 
in  order  to  know  exactly  what  the  present  per- 
centage of  income  from  the  property  will  be. 
If  the  net  returns  shall  amount  to  over  six  per 
cent,  upon  the  amount  which  must  be  invested 
other  conditions  being  in  conformity  with  regular 
principles,  the  investment  must  be  considered  as 
highly  satisfactory.  In  fact,  if  there  has  been 
no  mistake  or  omission  in  the  calculation,  a  net 
return  which  shall  amotint  to  considerably  less 
than  six  per  cent,  upon  the  total  cost  of  the  real 
estate  will  prove,  in  the  main,  to  be  better  than 
the  average  returns  from  equally  safe  investments. 

The  calculation  upon  which  the  success  or 
failure  of  such  a  transaction  will  largely  depend 


Real  Property  217 

should  be,  whenever  such  is  possible,  founded  upon 
actual  rather  than  upon  estimated  data.  The 
actual  average  of  rentals  for  a  number  of  years 
ought  to  be  known  with  reasonable  certainty; 
the  amount  of  taxes  and  water  rates  should  be 
learned  directly  from  the  tax  books;  and  the 
possible  future  assessments  from  the  conditions 
of  surrounding  streets,  and  the  cost  of  previous 
public  improvements  which  are  similar  to  those 
which  are  likely  to  be  made.  Similarly,  all  ex- 
penses, such  as  insurance,  repairs,  janitors' salaries, 
heat,  light,  etc.,  are  to  be  determined  from  the 
most  accurate  statements  which  may  be  obtained, 
together  with  careful  examinations  of  the  prem- 
ises, conversations  with  janitors  and  owners,  and 
a  general  ability  on  the  part  of  purchasers  to 
estimate  closely  the  costs  and  values  of  such 
items.  Careftil  attention  to  these  matters  will 
be  necessary,  for  the  reason  that  little  dependence 
may  properly  be  placed  upon  the  statements  of 
owners  who  wish  to  sell,  and  of  agents  who  are 
looking  chiefly  for  the  commissions  which  will 
result  from  the  sales. 

Sinking  Funds. — In  all  cases  of  permanently 
improved  real  estate  (and  by  this  is  meant  real 
estate  upon  which  are  buildings  which  are  in- 
tended to  be  permanent,  not  being  erected  for 
temporary  purposes,  or  so  old  and  in  such  poor 
conditions  as  to  be  necessarily  short-lived)  a  sink- 


2i8    The  American  Business  Woman 

ing  fund  must  be  included  in  the  data  by  means 
of  which  the  calculation  of  returns  shall  be  made. 
The  best  of  buildings  will  evidently  not  endure 
indefinitely,  and  the  calculation  in  question  must 
place  investors  in  such  positions  that,  when 
particular  buildings  shall  have  become  worn  out, 
and  practically  useless,  the  investments  will  have 
provided  for  the  erection  of  new  buildings,  of 
at  least  equal  costs  with  the  old  ones.  The  sink- 
ing fund  must  necessarily  be  a  matter  of  estima- 
tion, since,  evidently,  it  will  be  impossible  to 
determine,  accurately,  during  what  periods  of 
time  certain  buildings  may  be  maintained  in 
tenantable  condition;  it  will  also  vary  with  the 
ages,  kinds,  and  qualities  of  buildings,  with 
the  wear  and  tear  upon  buildings,  and  with  the 
amounts  which  shall  be  devoted  to  the  repairing 
of  buildings,  from  year  to  year.  If  it  shall  be 
estimated  that  a  certain  building  will  endure  for 
a  period  of  one  hundred  years,  the  annual  sinking 
fund  will  be  the  cost  of  the  building  divided  by 
one  hundred,  or  one  per  cent,  of  the  cost;  if 
seventy-five  years  shall  be  allowed  for  the  life 
of  a  building,  the  annual  allowance  for  the  sinking 
fund  will  be  one  and  one  third  per  cent,  of  the 
cost ;  and  if  the  life  of  a  building  shall  be  estimated 
at  fifty  years,  the  annual  sinking  fund  will  be  one 
fiftieth,  or  two  per  cent,  of  the  cost. 

For    first-class    new    buildings   of    brick    and 
stone,  with  ordinary  amounts  of  repairs,  probably 


Real  Property  219 

one  per  cent,  per  annum  may  be  considered  to  be 
a  fair  allowance  for  the  purposes  of  sinking  funds ; 
for  new  buildings  of  poorer  or  ordinary  qualities 
constructed  of  brick  and  stone,  the  allowance 
should  be  about  one  and  one  half  per  cent,  per 
annum;  and  for  new  frame  buildings,  which  shall 
be  kept  at  all  times  in  good  repair,  probably 
two  per  cent,  per  annum  will  prove  to  be  none 
too  high. 

A  rough  rule,  for  general  purposes,  and  one 
which  will  not  lead  very  far  from  the  truth  in  the 
majority  of  cases,  is  to  allow  two  and  one  half 
per  cent,  upon  the  entire  cost  of  the  real  estate 
(including  both  land  and  buildings)  from  the 
total  annual  expenses.  If,  then,  an  investor  shall 
be  satisfied  with  a  net  income  of  five  and  one 
half  per  cent.,  the  necessary  average  rentals  may 
be  quickly  calculated  as  eight  per  cent,  upon  the 
price  which  may  be  paid  for  the  real  estate. 

Contract  for  Property. — After  the  terms 
and  conditions  upon  which  real  estate  is  to  be 
purchased  have  been  orally  agreed  upon  between 
the  vendor  and  the  vendee,  they  should  be  at  once 
put  in  writing,  in  the  form  of  what  is  known  as  a 
contract  for  the  sale  of  land,  or  a  **  contract  for 
property."  Upon  signing  the  contract  for  prop- 
erty, a  portion  of  the  agreed  purchase-price  is 
paid  to  the  vendor  as  a  consideration  for  the 
contract,  or,  as  is  commonly  said,  "to  bind  the 


220    The  American  Business  Woman 

bargain."  Upon  general  principles,  this  payment 
should  be  as  small  as  the  vendor  shall  be  willing 
to  accept;  for  ever  so  small  an  amount  will  be 
a  sufficient  legal  consideration,  and,  if  the  pur- 
chase shall  fail  to  go  through,  the  proposed  pur- 
chaser may  not  be  able  to  get  back  the  amount 
which  has  been  paid  on  account,  because  of 
legal  difficulties,  or  because  of  a  suddenly  acquired 
irresponsibility  on  the  part  of  the  vendor. 

A  contract  for  property  is  an  instrument  of 
great  importance,  since  it  is  the  only  definite 
evidence  of  the  actual  agreement.  It  should  be 
drawn  in  duplicate,  each  party  having  one  of 
the  copies,  and  each  copy  being  properly  signed 
and  sealed  by  both  parties. 

The  agreements  or  clauses  which  are  contained 
in  a  contract  for  property  are  generally  as  follows : 

A  statement  of  the  date  of  the  contract  and  the 
names  and  designations  of  the  parties,  the  grantor 
being  the  party  of  the  first  part,  and  the  grantee 
the  party  of  the  second  part;  an  agreement  to 
the  effect  that,  in  consideration  of  the  amount 
which  has  been  paid  on  account,  the  party  of  the 
first  part  will  sell  to  the  party  of  the  second  part 
the  real  estate  in  question,  carefully  describing 
the  real  estate  as  in  a  deed  of  conveyance;  an 
agreement  that  the  party  of  the  first  part  will 
deliver  to  the  party  of  the  second  part  a  warranty 
deed  with  full  covenants  for  the  premises  (unless 
there  are  reasons  for  omitting  certain  covenants) 


Real  Property  221 

upon  condition  that  the  party  of  the  second  part 
shall  pay  to  the  party  of  the  first  part  the  amount 
of  the  purchase-price,  describing  the  manner  of 
payment — in  cash,  by  instalments  upon  certain 
dates,  by  notes,  or  by  mortgages,  as  the  case  may 
be;  a  statement  of  all  mortgages,  interest,  taxes, 
assessments,  and  other  incumbrances  upon  the 
premises,  and  an  agreement  as  to  how  these  liens 
shall  be  paid;  an  agreement  that  the  party  of  the 
second  part  will  pay  the  amount  of  the  purchase- 
price  in  the  manner  specified,  that  the  amoimt 
which  has  been  paid  to  bind  the  bargain  shall 
belong  to  the  party  of  the  first  part  if  the  party 
of  the  second  part  shall  fail  to  fulfil  the  agreement, 
and  that  in  such  case  the  party  of  the  first  part 
may  consider  the  contract  annulled,  and  sell 
the  property  to  other  parties;  and,  finally,  an 
agreement  that  the  contract  shall  bind  the  parties 
and  their  heirs,  executors,  and  administrators,  and 
assigns.  The  contract  should  be  taken,  as  soon 
as  possible  after  the  signing,  to  the  lawyers  who 
are  to  examine  the  title,  with  such  other  papers 
as  the  vendor  may  furnish  for  facilitating  the 
examination. 

Improved  and  Unimproved  Land. — In  many 
important  respects  vacant  or  unimproved  real 
estate  will  possess  advantages  over  improved  real 
estate,  which,  for  investors  who  shall  be  able 
and  willing   to   lose   portions   of   their   incomes 


222    The  American  Business  Woman 

temporarily  for  the  sake  of  obtaining  ultimately- 
superior  investments  must  entitle  it  to  a  decided 
preference.  For  reasons  which  have  already 
been  explained,  unimproved  real  estate  generally 
may  be  purchased  to  much  better  advantage 
than  improved  real  estate;  it  will  be  much  more 
likely  than  improved  real  estate  to  increase  in 
values;  the  danger  of  being  cheated  in  the  pur- 
chasing of  poor  buildings  will  be  avoided  by  the 
purchasing  of  unimproved  real  estate;  and,  when 
finally  improved,  the  owners  may  be  possessed 
of  substantial  new  buildings  which  shall  be  in 
all  respects  modern,  smtable  for  the  localities  of 
the  real  estate,  and  in  accordance  with  the  tastes 
and  preferences  of  the  investors.  Moreover,  for 
the  purposes  of  ground-leases,  the  advantages  of 
which  will  be  explained  later,  unimproved  real 
estate  alone  will  be  available  without  loss  frbm 
the  destruction  of  buildings. 

At  this  point,  the  attention  of  the  reader  may 
be  called  again  to  the  distinction  between  invest- 
ments and  speculations.  With  regard  to  unim- 
proved real  estate,  the  distinction  between 
investments  and  speculations,  although  somewhat 
finer  than  in  other  kinds  of  property,  may  be 
stated  in  this  manner:  If  unimproved  real  estate 
shall  be  purchased,  for  the  purpose  of  improving 
or  otherwise  maintaining  it  as  a  means  of  ob- 
taining regular  incomes,  although  investors  may 
require    increases    of    values    before    permanent 


Real  Property  223 

dispositions  of  the  property  can  be  made,  the 
transactions  will  be  investments;  if  unimproved 
real  estate  shall  be  piirchased  for  the  direct 
purpose  of  selling  it  at  some  future  time  at  a 
profit,  although  the  property  may  be  improved 
for  the  sake  of  obtaining  incomes  while  seeking 
purchasers,  the  transactions  will  be  speculations. 
The  regular  theory  with  regard  to  investments 
in  unimproved  real  estate  is,  that  real  estate  shall 
be  purchased  during  times  of  depression,  and 
held  until  such  times  as  it  may  be  advantageously 
improved  by  the  erection  of  permanent  buildings. 
For  the  purpose  of  earning,  wholly  or  in  part, 
the  expenses  which  will  be  necessary  for  the 
holding  of  unimproved  real  estate,  property  upon 
which  are  old  buildings,  which,  while  they  will 
add  nothing  to  the  cost  of  the  property,  will  pay 
small  rentals,  will  be  desirable.  Such  buildings 
can  be  let  for  such  purposes  as  small  shops, 
temporary  stables,  lumber  yards,  coal  yards,  etc., 
at  low  rentals,  if  need  be,  and  thus  they  may  be 
the  means  of  making  real  estate  considerably 
less  btirdensome  to  the  owners. 

Erection  of  Buildings. — When  the  proper 
times  for  the  improvement  of  real  estate  shall 
arrive,  investors  may  erect  such  buildings  as  will 
be  best  suited  to  the  particular  localities,  taking 
care  to  consider  the  possibilities  of  future  develop- 
ment and  the  needs  of  the  neighborhoods,  and 


224    The  American  Business  Woman 

providing  buildings  the  characters  of  which  shall 
be  considerably  ahead  of  the  times,  rather  than 
those  which  may  soon  become  old-fashioned  and 
antiquated.  If  investors  shall  be  in  doubt  con- 
cerning the  styles  of  buildings  which  will  be  most 
advantageous,  or  if  it  shall  be  desirable  to  test 
the  conditions  of  neighborhoods  with  reference 
to  the  numbers  and  kinds  of  tenants  which  will 
be  available,  premises  may  be  advertised  to  the 
effect  that  the  owners  will  improve  them  to  suit 
tenants;  tenants  will  be  thus  obtained  before  the 
erection  of  the  buildings,  or  the  probabilities  that 
satisfactory  tenants  cannot  be  obtained  will  be 
demonstrated.  The  responsibilities  of  tenants 
who  shall  be  obtained  in  this  manner  must  be 
assured;  otherwise  investors  may  become  pos- 
sessed of  unsuitable  buildings  in  which  there 
shall  be  no  tenants.  Moreover,  the  agreements 
between  investors  and  tenants,  in  such  cases, 
should  be  drawn  with  great  care,  covering  plainly 
and  thoroughly  all  points  which  may  possi- 
bly be  the  subjects  of  misunderstandings  or  of 
disagreements. 

In  the  construction  of  buildings  for  investment 
purposes,  perhaps  even  to  a  greater  extent  than 
when  buildings  are  to  be  used  for  all  purposes,  it 
is  important  that  only  builders  and  contractors 
of  established  reputations  and  responsibilities  shall 
be  employed.  In  theory,  owners  are  presumed 
to  have  considerable  numbers  of  estimates,  from 


Real  Property  225 

different  builders,  for  the  construction  of  pro- 
posed improvements,  and  to  sign  contracts  with 
the  lowest  bidders.  This  theory  will  prove  to 
be  practically  satisfactory  only  when  the  estimat- 
ing parties  shall  be  equally  competent  and  re- 
sponsible. The  better  rule,  in  the  majority  of 
cases,  will  be  to  allow  only  satisfactory  builders 
to  estimate  upon  proposed  buildings,  and,  even 
in  such  cases,  after  the  estimates  have  been 
compared,  to  consider,  not  only  the  relative 
amounts  of  the  estimates,  but  also  the  relative 
merits  of  the  builders.  A  poorly  constructed 
building  will  not  be  cheap  at  any  cost ;  a  building 
constructed  in  the  ordinary  manner  will  be  cheap 
only  if  obtained  at  a  low  figure;  a  first-class, 
exceptionally  substantial  building  may  be  cheap 
at  a  cost  which  is  considerably  higher  than  the 
average.  Builders  who  are  accustomed  to  doing 
cheap,  poor  work,  at  low  figures,  and  builders 
who  claim  to  be  able  and  willing  to  do  either 
good  or  poor  work,  according  to  requirements, 
may  wisely  be  dispensed  with,  and  such  con- 
tractors as  will  not  do  poor  work  under  any  cir- 
cumstances may  well  be  chosen.  For  the  purpose 
of  selecting  builders  of  the  latter  kind,  the  best 
possible  references  will  be  lists  of  buildings  which 
have  been  previously  constructed  by  the  par- 
ticular builders;  inspections  of  such  buildings  will 
often  give  all  the  information  which  may  be 
necessary  in  this  important  respect. 

IS 


226  The  American  Business  Woman 

Increases  in  Values  of  Land. — The  methods 
of  reasoning  by  which  the  probabiUties  of  in- 
creases in  the  values  of  real  estate  must  be  de- 
termined, are  complicated  by  the  elements  of 
uncertainty,  which  are  attendant,  to  a  greater 
or  a  less  degree,  upon  all  considerations  which 
involve  future  events.  As  a  proposition  purely  ab- 
stract, it  may  not  be  denied  that  the  future,  with 
respect  to  all  things,  is  mysterious  and  uncertain. 
But  investors  must  give  to  this  truth  only  brief 
contemplation,  for  the  reason  that  improper 
dispositions  towards  timidity,  which  will  uni- 
formly result  in  disadvantage  and  lost  oppor- 
tunity, must  be  avoided.  All  considerations  with 
reference  to  the  subject  of  investments  must  be 
based  upon  the  presumptions,  not  only  that  an 
unlimited  future  is  positively  assured,  but  that 
the  events  of  the  future  will  follow  fixed  and  defi- 
nite rules — rules  which  have  long  since  been 
established,  and  which,  consequently,  have  de- 
termined, for  our  instruction,  the  events  of  the 
past. 

The  first  direct  cause  for  an  increase  in  the 
value  of  real  estate  is  an  increase  in  the  demand 
for  real  estate,  or  a  voluntary  increase  in  the 
surrounding  population ;  and  the  first  direct  cause 
of  a  voluntary  increase  in  the  population  of  a 
partictilar  neighborhood  is  an  exceptional  oppor- 
tunity for  making  money,  or  a  natural  advantage 
for  business  purposes. 


Real  Property  227 

In  order  that  real  estate,  which  shall  be  piir- 
chased  as  an  investment,  shall  fulfil  entirely  the 
conditions  by  which  the  necessary  margin  of 
safety  will  be  obtained,  the  rule  of  causes,  which 
has  been  stated,  will  require  that  the  real  estate 
shall  be  situated  in  a  neighborhood  or  locality 
wherein  the  amoimt  of  business,  and  consequently 
the  population,  will  certainly  increase.  If  this 
increase  shall  be  rapid,  the  increase  in  values 
will  be  also  rapid;  if  the  increase  in  population 
shall  be  spasmodic  and  irregular,  the  increase  in 
values  will  be  of  the  same  character;  and  if  the 
increase  in  population  shall  be  slow  and  steady 
just  so  slowly  and  steadily  will  the  values  of 
real  estate  increase. 

Investments  in  real  estate,  which  will  depend, 
for  necessary  margins  of  safety,  upon  future  in- 
creases in  values,  should  be  made  only  in  large 
cities ;  or  at  least,  only  in  cities  which  have  already 
become  established  beyond  question  as  active, 
permanent  business  places. 

Control  of  Land. — Having  now  reached  the 
discussion  of  the  second  and  remaining  requisite 
of  safety  in  real -estate  investments,  to  wit:  that 
the  security  shall  be  within  the  control  of  the 
investor,  it  will  be  evident,  without  argument, 
that  this  requisite  will  be  satisfied  perfectly  only 
when  investors  shall  be  the  sole  owners  of  their 
securities.     This  condition  of  sole  ownership,  the 


228  The  American  Business  Woman 

importance  of  which  has  been  already  explained, 
will  require  an  especial  exposition  in  connection 
with  the  subject  of  real  estate,  for  the  reasons 
that,  owing  to  the  peculiar  nature  of  real  estate, 
joint  ownerships  will  be  more  common  than  in 
cases  of^  personal  property,  and  that  an  actual 
division  of  real  estate  among  several  owners,  for 
the  purpose  of  giving  each  a  full  ownership  of 
a  specific  portion,  will  not  always  be  a  simple 
matter. 

The  natural  and  proper  desire  that  valuable 
real  estate  shall  remain  in  the  families  of  in- 
vestors indefinitely,  and  the  natural  and  proper 
desire  that  all  children  of  investors  shall  be  equal 
heirs  or  devisees,  will  result  often  in  joint  owner- 
ships (among  all  the  children  of  deceased  in- 
vestors) of  the  real  estate  which  shall  be  owned 
by  investors  at  the  times  of  their  deaths,  the  real 
estate  being  commonly  of  such  a  character  as  to 
preclude  equitable  divisions  among  the  heirs  in 
severalty. 

In  this  manner  certain  parcels  of  real  estate 
become  the  joint  property  of  several,  and  a  further 
descent  or  devising,  which  shall  be  due  to  the 
deaths  of  one  or  more  of  the  joint  owners,  will 
still  further  complicate  the  various  interests. 

Where  there  shall  be  several  owners  of  valuable 
real  estate,  which,  by  reason  of  its  unimproved 
condition,  or  the  divisible  characters  of  the 
buildings,  may  be  actually  divided  pro  rata  among 


Real  Property  229 

the  owners,  without  injury  to  the  interests  of 
the  owners,  such  a  division,  to  be  made  by  ami- 
cable agreement,  should  be  earnestly  sought.  If 
a  division  which  will  give  to  each  owner  a  separate 
portion  of  the  real  estate  cannot  be  made,  an 
understanding  should  be  reached  by  which  the 
division  may  be  carried  as  far  as  circumstances 
will  allow;  that  is,  an  attempt  should  be  made  to 
reduce,  by  friendly  agreements,  the  number  of 
owners  of  each  separate  plot  to  the  smallest 
possible. 

A  method  of  managing  real  estate  which  shall 
belong  to  many  joint  owners  having  different 
interests, — a  method  which  will  often  prove  to 
be  a  satisfactory  means  of  retaining  valuable 
real  estate, — consists  of  formal  written  agree- 
ments, on  the  parts  of  all  the  owners,  giving  to 
one  or  more  of  the  owners  sole  charge  of  the 
property,  and  requiring  the  managing  owners  to 
receive  the  rents  and  profits,  to  pay  the  taxes 
and  other  charges,  to  make  the  necessary  re- 
pairs, and,  at  stated  periods,  to  render  accounts 
to  all  the  owners. 

Managing  owners,  tmder  agreements  such  as 
have  been  described,  may  be  required  to  furnish 
bonds  for  the  proper  performance  of  their  duties 
although  ordinarily  their  interests  in  the  par- 
ticular real  estate  should  be  sufficient  guaranties. 

If,  in  a  particular  case,  an  agreement,  of  the 
nature  which  has  been  suggested,  shall  prove  to 


230  The  American  Business  Woman 

be  unsatisfactory  or  impossible  of  consummation, 
propositions  may  be  made  by  certain  of  the  owners 
to  buy  out  certain  others  at  specified  prices; 
the  property  may  be  placed  upon  the  market  for 
sale  at  a  price  which  shall  be  agreed  upon,  in 
writing,  by  all  the  owners;  or  it  may  be  sold,  upon 
a  similar  agreement,  at  public  auction. 

Finally,  if  all  attempts  to  arrange  matters  in 
an  amicable  manner  shall  fail,  and  the  difficulties 
of  the  situation  shall  become  too  great  for  solu- 
tion by  any  other  simple  means,  a  partition  suit 
at  law  must  be  brought  without  delay. 

Legal  proceedings  of  this  kind  are  generally 
expensive  and  tedious,  the  costs  and  counsel 
fees  which  are  allowed  by  the  courts  being  in 
accordance  with  the  complicated  nature  of  the 
proceedings  and  the  care  with  which  they  must 
be  conducted;  they  should,  therefore,  be  avoided 
whenever  avoidance  shall  be  possible  without 
too  great  sacrifices  to  the  cause  of  amicable  settle- 
ments. Described  in  as  brief  a  manner  as  is 
possible,  a  partition  proceeding  is  a  suit  at  law 
which  is  brought  by  one  or  more  joint  owners  of 
real  estate  against  the  others  for  the  purpose 
of  obtaining  a  judicial  division  (partition)  of 
the  property.  The  final  result  usually  is  the 
sale  of  the  property  at  public  auction,  and  the 
distribution  of  the  proceeds,  after  deducting 
costs  and  expenses,  among  the  former  owners, 
pro  rata.     It  will  prove  to  be  advantageous  to  all 


Real  Property  231 

owners,  therefore,  if  such  proceedings  shall  be  so 
timed  as  to  bring  the  auction  sales  at  periods 
when  values  of  real  estate  will  be  at  the  highest 
points.  The  various  owners  should  attend  the 
auction  sales,  prepared,  if  possible,  to  bid  in  the 
valuable  properties,  if  such  a  course  shall  be 
necessary  to  prevent  sales  at  very  low  prices. 

Still  another  requirement  of  the  rule  that  the 
security  must  be  within  the  control  of  the  in- 
vestor, is  that  real  estate  shall  be  so  located  that 
it  may  be  easily  watched  and  inspected,  at  fre- 
quent intervals,  by  the  owners,  or  by  trusty 
agents.  Taxes  must  be  watched,  in  order  that 
owners  may  be  able  to  protest  against,  and  to 
take  timely  measures  to  prevent,  unjust  and 
unequal  valuations;  special  assessments  must  be 
kept  in  view,  and  anticipated,  in  order  that  they 
may  be  kept  within  proper  limits;  possible  con- 
demnation proceedings  must  not  be  allowed  to 
go  by  default  for  want  of  knowledge  and  informa- 
tion concerning  them;  in  certain  kinds  of  real 
estate,  squatters  must  be  kept  off,  lest  they 
become  the  owners  through  long  occupancy  and 
adverse  possession ;  frauds  concerning  the  amounts 
of  rentals,  repairs,  etc.,  must  be  guarded  against; 
and,  in  general,  owners  must  be  kept  at  all  times 
well  informed  with  regard  to  the  conditions  of 
their  properties  and  of  the  surrounding  neigh- 
borhoods. Accordingly,  investors  in  real  estate 
must  make  frequent  visits  to  their  properties, 


232  The  American  Business  Woman 

whether  the  properties  shall  be  near  the  homes  of 
the  owners  or  far  away.  And,  if  it  shall  be  im- 
possible properly  to  attend  to  this  precaution 
at  considerable  distances  from  their  homes,  or 
to  accomplish  the  necessary  resiilts  by  the  em- 
ployment of  agents,  whose  abilities  and  honesty 
shall  be  beyond  question,  investors  must  neces- 
sarily make  their  investments  of  this  kind  near 
their  homes,  although  they  may  thus  lose  the 
benefits  of  extended  fields  of  investment. 

'  Incomes  from  Real  Property. — The  final 
consideration  with  regard  to  investments  (namely, 
that  they  shall  return  fair  and  regular  incomes) 
remains  to  be  discussed  and  to  be  applied  to  the 
special  case  of  investments  in  real  estate. 

The  income  from  real  estate  being  the  differ- 
ence between  the  rents  and  profits,  upon  the  one 
hand,  and  the  expenditures  upon  the  other,  it 
is  evident  that  the  amount  of  income  from  a 
particular  piece  of  real  estate  will  reach  its  theo- 
retical maximum  only  when  the  rents  and  profits 
shall  be  at  their  highest  possible  points,  and  the 
expenditures  shall  be  at  their  lowest.  But,  for 
general  reasons  which  have  been  already  ex- 
plained, and  for  special  reasons  which  will  be 
referred  to  in  the  proper  place,  neither  of  these 
conditions  is  thought  to  be  desirable  in  its  extreme 
aspect.  In  accordance  with  the  principle  that 
incomes  must  be  fair  and  regular,  rather  than 


Real  Property  233 

the  highest  possible,  the  statement  of  these  two 
conditions  must  be  modified  and  expressed  in  the 
following  practical  manner : 

In  order  that  real  estate  may  return  fair  and 
regular  incomes,  it  will  be  necessary,  first,  that 
the  rents  and  profits  shall  be  as  high  as  shall 
be  consistent  with  regularity  and  the  prosperity 
of  tenants;  and,  second,  that  the  expenditures 
shall  be  as  low  as  shall  be  consistent  with  the 
proper  conditions  of  the  premises.  Since  the 
latter  condition  may  be  considered  more  briefly 
than  the  former  (which  must  include  the  entire 
subject  of  landlord  and)  tenant)  it  may  conve- 
niently be  treated  and  disposed  of  at  once. 

The  subject  of  expenditures  upon  real  estate 
(by  which  is  meant  regular  annual  expenditures 
for  the  purposes  of  meeting  public  charges  against 
the  real  estate,  of  keeping  the  premises  in  proper 
repair  and  security,  and  of  securing  and  col- 
lecting the  rents  and  profits)  may  be  conveniently 
divided  into  four  subdivisions,  namely:  taxes 
and  assessments;  repairs  and  ordinary  expenses; 
insurance;  and  commissions. 

Taxes. — Before  considering  these  questions, 
however,  it  will  be  beneficial  to  give  a  brief 
explanation  of  the  method  by  which  the  amount 
of  the  general  tax  and  the  tax  rate,  for  any  given 
locality,  are  determined.  In  principle  this  method 
is  simple,  though  in  detail  it  is  necessarily  compli- 


234  The  American  Business  Woman 

cated.  The  regular  total  expense  of  a  municipal 
government  is  evidently  a  known  quantity,  and, 
with  such  allowances  for  uncollectable  taxes, 
and  other  contingencies  as  experience  has  shown 
to  be  necessary,  the  amount  which  shall  be  neces- 
sary to  pay  the  annual  expenses  may  be  ascer- 
tained without  difficulty  a  year  in  advance. 
This  having  been  accomplished,  each  parcel  of 
real  estate  within  the  tax  district  is  appraised  or 
valued  by  the  public  officers,  and  likewise  the 
personal  property  which  is  subject  to  taxation. 
The  amount  which  must  be  raised  by  taxation 
is  then  apportioned  pro  rata  upon  the  taxable  prop- 
erty, the  total  amount  of  the  tax,  divided  by  the 
total  valuation,  giving  the  tax  rate  or  percentage 
of  taxation. 

From  this  explanation  it  will  be  seen  without 
difficulty  that  the  valuation  of  the  taxable  prop- 
erty and  the  tax  rate  are  only  the  quantities 
which  make  up  the  actual  amount  of  the  tax, 
and  that  the  all-important  factor  in  the  calcu- 
lation is  the  amount  of  the  municipal  expenses. 

The  ignorance  of  the  masses  upon  this  subject 
has  often  been  taken  advantage  of  for  question- 
able political  purposes,  the  valuations  (which  in 
particular  cases  are  known  only  to  the  individual 
taxpayers)  being  increased  in  order  that  the  tax 
rates  (which  are  common  to  all  taxpayers,  and 
which  are  the  common  talk  of  the  communities) 
may  be  decreased,  and  the  people  deceived  by 


Real  Property  235 

the  idea  that  the  taxes  have  been  actually  lowered 
by  the  economic  and  wise  administration  of  the 
political  party  which  is  then  in  power.  The  one 
important  item  in  the  question  of  taxation  is  the 
public  expenditure  of  the  citizens'  money,  and 
to  this  the  attention  of  taxpayers  and  of  honest 
citizens  generally  must  be  directed. 

It  cannot  be  doubted  that  every  taxpayer  has 
the  general  right  to  demand  that  the  public 
moneys  shall  be  honestly  expended  by  the  public 
officials.  This  right  is  not  confined  to  a  mere 
privilege  of  protest  against  public  fraud  and  ex- 
travagance, but  authorizes  the  taxpayer  to  look 
into  the  acts  and  proposed  acts  of  public  officials; 
by  the  aid  of  the  courts,  to  prevent  frauds  and 
extravagances;  and  to  punish  the  public  officials 
upon  whom  the  responsibility  for  such  acts  shall 
be  fixed. 

High  taxes  upon  real  estate  invariably  work 
hardships  and  heavy  burdens  to  that  class  which 
constitutes  a  very  large  majority  of  the  citizens 
in  every  community — that  is  the  rent-paying 
class — without  furnishing  corresponding  benefits 
to  any,  unless  it  be  to  unscrupulous  or  over-paid 
politicians.  For,  in  every  regular  case,  high 
taxes  must  result  in  high  rents,  and  the  burden 
of  the  taxes  must  therefore  fall  upon  the  tenants; 
while  the  landlords,  whose  rentals  will  be  calcu- 
lated upon  the  basis  of  certain  percentages  upon 
the  amounts  which  have  been  invested,  in  ad- 


236  The  American  Business  Woman 

dition  to  the  expenses  of  maintaining  the  prop- 
erties (of  which  the  taxes  will  be  the  principal) 
will  receive  no  benefit  from  the  high  rents.  Tested 
by  all  the  legitimate  conclusions  of  logic,  as  well 
as  by  the  practical  results  of  ordinary  experience, 
these  statements  must  be  generally  true.  But 
should  they,  nevertheless,  be  doubted,  a  com- 
parison of  tax  and  rent  statistics  of  various  cities 
will  show,  beyond  chance  of  misapprehension, 
that  the  actual  facts  fully  sustain  the  logical 
conclusions. 

A  widely  prevalent,  and  likewise,  an  injurious 
and  an  erroneous  theory,  exists  among  tenants, 
to  the  effect  that  their  interests  and  benefits  are, 
in  the  main,  contrary  to  those  of  landlords — that 
an  injury  to  landlords  in  general,  will  rather 
benefit  than  rebound  upon  tenants.  Exactly 
the  reverse  of  this  theory  is  undoubtedly  true. 
If  tenants  shall  vote  for,  and  use  their  influence 
for,  heavy  public  expenditures  and  consequent 
high  taxes,  they  will  be  directly  responsible  for 
the  increases  in  their  own  rents  which  must  even- 
tually result;  if  tenants  shall  abuse  the  premises 
which  they  occupy,  and  thus  put  their  landlords 
to  heavy  expense  for  repairs,  they  are  indeed 
enlisting  in  the  ridiciilous  cause  of  increasing 
the  landlords'  necessary  allowances  for  repairs, 
and  consequently  their  own  rents;  and  if  tenants 
shall  be  unreasonably  slow  with  their  payments 
of  rents,  or  shall  otherwise  cause  trouble  or  loss 


Real  Property  237 

to  the  landlords,  they  may  properly  blame  them- 
selves if  they  shall  find  increasing  tendencies 
among  landlords  to  make  larger  allowances  for 
loss  of  rents  and  cost  of  collections.  It  appears, 
therefore,  that  landlords  and  tenants  will  be 
mutually  benefited  if,  instead  of  imagining  a 
contrariety  of  interests,  they  shall  work  steadily 
and  heartily  together  for  the  attainment  of  low 
taxes  and  moderate  rents. 

The  law  requires  that  taxes  shall  be  equal  and 
uniform;  that  is,  real  estate  having  equal  values 
in  the  same  neighborhoods  must  be  equally 
taxed;  real  estate  having  exactly  twice  or  thrice 
the  values  of  other  pieces  of  real  estate  must  pay 
exactly  twice  or  thrice  the  amount  of  taxes  which 
shall  be  paid  by  the  latter.  All  tax  valuations 
are  open  for  the  inspection  of  the  public,  at  the 
proper  public  offices,  and  for  specified  times 
before  the  taxes  shall  be  confirmed.  Careful 
and  prudent  taxpayers  will,  each  year,  compare 
the  valuations  of  their  own  real  estate  with  those 
of  neighboring  pieces  of  real  estate,  and  will  take 
prompt  and  energetic  measures  to  maintain  the 
required  uniformity  of  taxes. 

If  an  inequality  of  valuations  shall  be  dis- 
covered, to  the  injury  of  a  taxpayer,  a  carefully 
written  statement  of  all  the  facts  of  comparison, 
with  a  request  for  a  proper  correction  of  the  par- 
ticular valuation,  should  be  at  once  sent  to  the 
public   officers   who   are   authorized   by    law   to 


238  The  American  Business  Woman 

correct  such  errors — the  tax  commissioners,  com- 
missioners of  appeals,  board  of  equalizers,  etc., 
according  to  the  nomenclatures  of  the  different 
States ;  and  if  just  and  uniform  valuations  cannot 
be  obtained  by  this  simple  means,  the  desired 
result  must  be  obtained  by  means  of  regular  legal 
proceedings. 

In  a  given  locality,  taxes  are  due  and  payable 
at  the  same  time  each  year.  Generally,  reduc- 
tions of  the  regular  amounts  of  taxes,  in  the  form 
of  rebates,  are  allowed  upon  all  taxes  which  shall 
be  paid  before  certain  designated  times,  or  penal- 
ties are  added  to  the  regular  amounts  of  taxes 
the  payment  of  which  shall  be  delayed  beyond 
certain  times  which  are  prescribed  by  the  laws. 
It  is  therefore  directly  advantageous  that  taxes 
shall  be  paid  at  the  earliest  possible  times  after 
they  shall  have  become  due  and  payable. 

In  general,  special  assessments  are  subject  to 
the  rules  and  regulations  which  govern  the  regular 
taxes,  with  the  exception  that  the  former  are 
necessarily  irregular  and  occasional.  They  must 
be  anticipated  whenever  the  opening  of  streets, 
paving,  sewering,  and  such  improvements  shall 
be  proposed,  and  the  methods  which  have  been 
suggested  must  then  be  regularly  followed. 

Tax  bills  are  to  be  obtained  at  the  proper  times 
from  the  public  officers  for  the  collection  of 
taxes  (according  to  the  practices  in  different 
States,  the  county  treasurer,  the  city  treasurer, 


Real  Property  ^239 

the  town  treasurer,  the  collector  of  taxes,  the 
receiver  of  taxes,  etc.)  upon  application  in  person 
or  by  mail,  and  should  be  paid  by  means  of 
checks  drawn  to  the  orders  of  the  proper  public 
officers.  The  bills  should  be  inspected  and  com- 
pared with  those  of  previous  years,  or  with  the 
maps  and  books  in  the  offices  of  the  tax  depart- 
ments, in  order  to  avoid  mistakes  in  the  descrip- 
tions of  real  estate ;  the  amounts  of  tax  bills  should 
also  be  verified  by  computing  the  correct  amounts 
from  the  given  valuations  and  tax  rates. 


Repairs. — The  second  sub-division  of  the  sub- 
ject of  expenditures  upon  real  estate  has  been 
chosen  under  the  title  of  repairs  and  ordinary 
expenses.  Concerning  the  latter,  little  need  be 
said.  They  consist  of  such  items  as  janitors' 
wages,  engineers'  wages,  the  wages  of  other 
employees,  coal,  gas,  and  material  and  imple- 
ments for  the  use  of  janitors  and  other  employees. 
The  same  care  and  scrutiny  in  such  matters  as 
are  exercised  by  prudent  and  judicious  persons 
in  the  general  management  of  employees  and  in 
the  purchasing  of  necessities  will  be  necessary. 

With  regard  to  the  very  important  item  of 
repairs  to  real  estate,  the  first  principle  must  be 
that  repairs  shall  be,  in  all  respects,  sufficient 
for  the  proper  preservation  of  buildings.  Prem- 
ises must  be  kept  in  good  repair,  else  their  con- 


240  The  American  Business  Woman 

ditions  will  become  rapidly  poorer,  and  the 
rentals  will  decrease  in  equal  ratios. 

Covenants,  by  which  tenants  agree  to  make 
all  necessary  repairs  to  the  premises  which  they 
occupy,  are  commonly  included  in  properly 
drawn  leases;  the  importance  of  such  covenants 
will  be  more  evident  after  a  study  of  the  chapter 
upon  the  subject  of  landlord  and  tenant.  In 
practice,  however,  it  will  be  necessary  that  land- 
lords shall  calculate  upon  making  and  paying 
for  all,  or  practically  all,  repairs  to  their  premises, 
notwithstanding  the  covenants  which  provide  for 
a  contrary  manner  of  proceeding.  It  may  be 
taken  as  a  general  rule,  that  tenants  will  not  pay 
for  repairs  to  the  premises  of  their  landlords 
unless  they  shall  be  compelled  to  do  so  by  process 
of  law,  even  though  they  shall  have  expressly 
agreed  to  do  so. 

Theoretically,  the  repairs  which  shall  be  made 
upon  investment  buildings  must  be  sufficient  to 
keep  the  premises  always  in  the  same  conditions 
with  respect  to  appearances,  and  general  con- 
venience, or  desirability  for  the  purposes  for 
which  they  are  intended.  Such  a  statement 
follows  from  the  fundamental  principle  that 
rentals  and  rental  values  must  not  be  allowed 
to  decline.  The  same  method  of  reasoning 
will  lead  to  a  higher  and  more  perfect  theory: 
that,  in  order  that  rentals  shall  continually  in- 
crease,   sufficient  amounts  of   repairs   must    be 


Real  Property  241 

made  to  improve  continually  the  conditions  of 
buildings. 

But,  unfortunately,  neither  of  these  theories 
can  be  perfectly  applied  in  practice,  for  there  are 
many  elements,  making  up  the  rental  values  of 
buildings  which  cannot  be  governed  by  the  extent 
of  repairs. 

Natural  wear  and  tear,  old  age,  modem  dis- 
covery and  improvements  which  are  included  in 
newer  buildings,  are  factors  which  can  neither  be 
neglected  nor  entirely  overcome. 

The  modified  general  rule  in  practice  must 
therefore  be  that  buildings  which  are  used  for 
investment  purposes  must  be  given  sufficient 
amounts  of  repairs  to  maintain  them,  as  nearly 
as  is  possible,  in  uniform  conditions,  with  respect 
to  the  particular  purposes  for  which  they  are 
used.  Certain  kinds  of  repairs,  which  are  neces- 
sary for  the  prevention  of  actual  decay  and 
dilapidation,  cannot  be  avoided  or  neglected 
under  any  ordinary  circumstances. 

One  particular  class  of  repairs  to  real  estate 
seems  to  require  a  special  consideration,  i.  e.,  re- 
pairs which  amount  to  alterations  in  the  general 
characters  or  constructions  of  buildings.  Such 
repairs  or  alterations  are  generally  in  the  form 
of  changes  in  the  arrangements  which  are  made 
to  suit  new  uses  and  kinds  of  businesses;  or 
changes  which  are  made  for  the  improvement 
of  buildings,   by   the   addition  of  modern  con- 


2^2  The  American  Business  Woman 

veniences,  such  as  elevators,  steam  heaters, 
electric  lights,  etc.  When  repairs  of  the  first 
kind  shall  be  contemplated,  it  will  be  necessary 
to  calculate  the  costs  and  the  benefits,  in  the 
form  of  increased  rents,  more  carefully  than  in 
those  of  the  latter  kind;  for  special  alterations 
which  are  improvements  only  for  special  branches 
of  business  will  result  in  increased  rentals  only 
when  tenants  who  are  engaged  in  the  special 
branches  of  business  shall  be  obtained  and  se- 
cured, while  general  improvements  of  the  latter 
kind,  if  properly  made,  will  surely  be  the  means 
of  increasing,  to  a  greater  or  a  less  extent,  the 
rentals. 

The  first  consideration  concerning  special  busi- 
ness alterations  of  real  estate  must  be  that  the 
increases  of  rentals  shall  be  sufficient  to  pay 
interest  upon  the  first  costs  of  the  alterations, 
repairs  to,  and  extra  taxes  and  insurance  on 
account  of,  the  alterations,  and  also  the  annual 
sinking  funds  which  must  be  allowed  upon  the 
costs  of  the  alterations.  If  a  prospective  tenant 
shall  desire  special  alterations,  which  probably 
will  be  useless  after  the  expiration  of  his  lease, 
the  entire  cost  of  the  repairs,  together  with  the 
interest  and  other  allowances,  must  be  added  to 
the  regular  rent  for  the  term  of  the  proposed 
lease.  On  the  other  hand,  if  the  usefulness  of 
proposed  alterations  will  outlast  the  terms  or 
occupancies  of  the  tenants  for  whom  the  altera- 


Real  Property  ^43 

tions  shall  be  made,  the  annual  sinking  funds 
must  be  calculated  in  the  usual  manner,  by  esti- 
mating the  probable  lives  of  the  alterations  and 
by  dividing  the  costs  by  the  number  of  years 
which  shall  be  furnished  by  the  estimation.  In 
such  a  case,  the  correct  provision  for  the  sinking 
funds  which  must  be  added  to  the  regular  rent 
during  the  occupancy  of  the  special  tenant  will 
be  simply  his  own  share  of  the  sinking  fimd — 
that  is,  the  annual  sinking  fund,  obtained  in  the 
regular  manner  during  his  occupancy — ^leaving 
for  future  tenants  the  making  up  of  the  balance. 

A  second  and  very  important  consideration, 
which  will  be  necessary  in  cases  of  special  altera- 
tions, is  the  reasonable  certainty  that  tenants 
for  whom  the  expenses  shall  be  incurred,  will 
occupy  the  premises,  and  will  pay  their  rents 
during  the  full  terms  of  their  leases.  Alterations 
of  this  kind  should  not  be  made  unless  tenants 
shall  furnish  ample  securities,  or  other  guarantees 
for  the  performance  of  all  their  agreements  with 
respect  to  the  premises. 

The  general  rule  with  regard  to  alterations  of 
buildings  by  the  addition  of  modem  conveniences 
which  may  have  been  introduced  to  the  public 
since  the  erection  of  the  buildings  in  which  the 
improvements  shall  be  contemplated,  may  be 
stated  as  follows : 

The  addition  of  actual  conveniences  will  result 
in  increases  of  rentals,  provided  the  improvements 


244  The  American  Business  Woman 

shall  be  suitable  in  all  respects  to  the  premises. 
If  the  construction  of  a  building  which  is  to  be 
improved  in  this  manner  shall  be  such  that  the 
particular  modem  convenience  cannot  be  added 
without  producing  corresponding  injuries  which 
will  more  than  counterbalance  the  improvement, 
evidently  the  building  will  be  better  without  the 
proposed  change. 

Fire  Insurance. — The  insurance  of  buildings 
and  fixtures  against  loss  or  damage  by  fire  is  a 
matter  of  great  importance  to  investors,  and,  at 
the  same  time,  one  which  is  commonly  passed 
over,  with  by  no  means  an  adequate  considera- 
tion, as  a  positive,  though  disagreeable  necessity. 

The  necessity  for  fire  insurance  rests  upon  the 
all-important  principle  of  security,  insurance 
being  the  nearest  approach  to  a  perfect  means  of 
making  secure  and  permanent  the  buildings  and 
fixtures  by  means  of  which  real  estate  is  made  to 
produce  incomes.  This  statement  will  evidently 
bring  the  general  subject  of  insurance  within  the 
operation  of  the  familiar  rules  of  investment 
which  have  been  explained  in  the  earlier  portions 
of  this  work.  The  general  rule,  therefore,  must 
be  that  buildings  are  to  be  kept  fully  and  con- 
tinuously insured  in  the  best  companies  which 
shall  be  available  for  the  owners. 

A  fire  insurance  policy  is  a  contract  between 
the  insuring  company  and  the  insured  property 


Real  Property  245 

owner  to  the  effect  that  the  former  will  pay  to 
the  latter  any  loss  or  damage  by  fire  which  may 
occur  to  certain  specified  property,  between  certain 
fixed  periods  of  time,  and  not  exceeding  a 
certain  specified  amount,  in  consideration  of  a 
certain  amount  of  money  which  is  called  the  pre- 
mium, and  which  has  been  paid  by  the  latter  to 
the  former.  The  amount  of  the  premium  is  deter- 
mined from  the  amount  of  the  policy  (or  the 
amount  which  shall  be  fixed  by  the  policy  as  the 
limit  to  be  paid  in  the  event  of  the  entire  de- 
struction of  the  property  insured)  and  the  rate 
or  percentage  which  is  charged  by  the  company. 

The  rates  of  insurance  vary  according  to  the 
chances  of  fire,  or  risks,  as  they  are  estimated 
by  the  insurance  companies.  Risks  are  divided 
into  arbitrary  classes,  such  as  uninsurable,  extra 
hazardous,  hazardous,  ordinary,  etc.  They  are 
determined  by  such  conditions  as  the  characters 
of  buildings  (frame  buildings,  buildings  of  brick 
or  stone,  buildings  having  wooden  beams,  floors, 
etc.,  fire-proof  buildings,  buildings  containing 
various  kinds  of  machinery,  heating  apparatus, 
steam  boilers,  etc.),  the  locations  of  buildings 
(whether  in  proximity  to  dangerous  fire  risks,  or 
at  safe  distances),  and  the  uses  and  occupations 
for  which  buildings  shall  be  employed. 

Since  the  rates  of  insurance,  and  consequently 
the  actual  costs  of  insurance,  will  be  seriously 
affected  by  conditions  such  as  have  been  men- 


246  The  American  Business  Woman 

tioned,  the  importance  of  careful  considerations 
of  the  subject,  in  connection  with  the  purchasing 
or  erection  of  investment  buildings,  the  selection 
of  tenants,  the  kinds  of  business,  and  the  general 
management  of  this  kind  of  property,  will  be 
sufficiently  obvious. 

Fire  insurance  is  usually  obtained  through 
regular  insurance  agents,  and  the  selections  of 
such  agents  will  be  matters  of  importance,  since, 
to  a  certain  extent  at  least,  they  must  be  depended 
upon  for  the  required  knowledge  concerning  the 
standing  of  various  insurance  companies,  as  well 
as  for  the  prompt  renewals  of  expiring  policies, 
and  for  the  proper  discrimination  between  com- 
panies with  reference  to  the  rates  which  shall 
be  charged,  in  order  to  avoid  both  needlessly 
high  premiums  and  the  placing  of  insurance  with 
irresponsible  companies  for  the  sake  of  economy. 

Only  agents  of  well-known  ability,  responsi- 
bility, and  integrity  should  be  employed;  and  they 
should  be  instructed  to  place  insurance  in  none 
but  first-class  companies.  As  an  additional  safe- 
guard, and  in  order  that  too  great  a  reliance 
upon  agents  may  not  be  required,  owners  of  in- 
sured property  may,  with  advantage,  keep  them- 
selves in  a  general  manner  informed  as  to  the 
conditions  of  the  various  companies,  by  paying 
attention  to  any  important  statements  concerning 
such  matters  which  may  occur  in  the  daily  news- 
papers, by  studying  the  effect  of  large  fires  upon 


Real  Property  247 

the  different  companies,  and  by  examining  the 
reports  of  financial  conditions  which  are  issued 
by  the  companies. 

Insurance  policies  should  state  correctly  the 
names  of  the  persons  to  whom  losses  if  any  are 
to  be  paid,  and  also  the  estates  or  interests  of  the 
insured  persons  in  the  property  which  is  insiu-ed, 
such  as ' '  owner, "  "  mortgagee, ' '  etc.  The  amounts 
of  the  policies,  and  the  exact  terms  or  dura- 
tions must  be  plainly  mentioned  in  the  poli- 
cies, the  usual  form  of  statement  being  to  the 
effect  that  the  insurance  company  does  insure 
Mary  J.  Doe  as  owner,  for  a  term  of  so  many 
years  from  such  a  day  at  noon  to  such  another 
day  at  noon,  against  loss  by  fire,  to  an  amount 
not  exceeding  so  many  dollars,  to  certain  described 
property. 

Insurance  policies  must  be  signed  by  the 
companies,  usually  by  such  of  their  officers  as 
the  president,  secretary,  or  manager;  otherwise, 
there  will  be  no  written  contracts  between  the 
companies  and  the  owners.  In  some  policies  the 
signatures  of  the  necessary  officers  are  printed  in 
the  regular  places  for  the  signatures  (in  order  to 
avoid  the  serious  task  of  obtaining  written  signa- 
tures of  these  officers  on  each  of  the  numerous 
policies  which  shall  be  issued  by  the  companies), 
in  which  case  the  policies  contain  a  clause  to  the 
effect  that  they  shall  not  be  valid  until  they  shall 
be  countersigned  by  the  duly  authorized  agents 


248  The  American  Business  Woman 

of  the  companies,  at  certain  places  (designating 
the  office  addresses  or  the  cities),  or  spaces  for 
the  written  signatures  of  the  agents,   with  the 

words  *' countersigned  at ,  this day  of , 

1897.  ,  Agent.'*  In  such  cases,  the  signa- 
tures of  the  agents  must,  of  course,  be  affixed  to 
the  policies  in  the  proper  places. 

Other  clauses  which  are  of  importance  to 
property  owners,  and  which,  therefore,  should  be 
attached  to  fire  insurance  policies,  are:  the  clause 
permitting  other  insurance  without  notice;  the 
lightning  clause,  which  provides  that  the  com- 
panies shall  be  liable  for  direct  losses  which  shall 
be  caused,  by  lightning;  the  clause  permitting 
mechanics  to  make  ordinary  alterations  and  re- 
pairs, without  notice  to  the  companies;  and  that 
allowing  the  use  of  oil  for  light,  and  the  vacancy 
of  buildings  for  certain  periods  of  time. 

The  common  method  of  insuring  a  building 
which  is  in  course  of  erection,  is  for  the  owner  to 
take  out  a  separate  policy  at  the  time  of  each 
payment  to  the  builders,  each  policy  covering 
the  amoimt  of  the  last  payment.  Such  policies 
should  contain  a  clause  by  which  the  companies 
shall  agree  to  assume  the  builders'  risks  while  the 
building  shall  be  in  an  unfinished  state. 

An  insurance  policy  which  is  about  to  expire 
may  be  renewed,  either  by  the  issuing  of  a  new 
policy,  dating  from  the  time  of  expiration  of  the 
old  policy,  or  by  means  of  a  certificate  of  renewal, 


Real  Property  249 

which  is  a  simple  certificate  stating  that,  in 
consideration   of   the   amount   of   the  premium, 

policy  No. is  renewed  for  a  certain  designated 

period  of  time,  giving  also  the  name  of  the  in- 
sured, the  amount  of  the  insurance,  and  a  brief 
description  of  the  premises  insured,  and  signed 
in  the  same  manner  as  is  the  policy.  Upon 
receiving  a  renewal  certificate  from  the  insur- 
ance agent,  the  owner  should  compare  it  care- 
fully with  the  expiring  policy,  and  attach  it  to, 
or  file  it  with,  the  policy  which  it  is  intended  to 
renew. 

Any  changes  in  the  ownerships  of  buildings, 
without  the  consents  of  the  insuring  companies; 
fraudulent  representations  to  the  agents  of  the 
companies,  concerning  the  characters  or  condi- 
tions of  buildings;  changes  in  the  uses  and  occu- 
pations of  buildings,  by  which  the  risks  of  fire 
shall  be  increased,  without  notice  to  the  com- 
panies; fraudulent  acts  of  owners,  which  shall 
cause  or  increase  the  losses  by  fire;  or  unreasonable 
delays  in  notifying  the  companies  of  losses  by 
fire,  may  entirely  invalidate  insurance  policies, 
and  discharge  the  companies  from  liability. 
If,  therefore,  there  shall  be  changes  of  ownership, 
or  of  occupancy,  such  as  will  increase  the  risks, 
or  losses  by  fire,  the  agents  must  be  at  once 
notified,  in  order  that  they  may  obtain  the  con- 
sents of  the  companies  to  the  changes  or  the 
adjustment  and  payment  of  the  losses. 


250  The  American  Business  Woman 

Commissions. — The  last  general  item  in  the 
subject  of  expenditures  upon  real  estate — com- 
missions— may  be  treated  more  briefly ;  it  involves 
simply  the  making  of  advantageous  agreements 
for  the  management  of  real  estate,  with  agents 
who  shall  be  in  all  respects  satisfactory. 

The  selection  of  an  agent  for  the  purpose  of 
taking  charge  of  improved  real  estate,  obtaining 
tenants,  collecting  rents,  in  some  degree  de- 
termining the  characters  and  occupations  of  the 
tenants,  selecting  employees,  and  making  expendi- 
tures, is  a  question  of  great  importance,  no  less 
than  of  considerable  difficulty  to  owners  of  real 
estate.  An  unwise  or  an  unfortunate  selection 
of  an  agent  will  often  result  in  bad  tenants; 
serious  injuries  to  buildings,  notwithstanding 
excessive  expenditures  for  repairs;  loss  of  ren- 
tals through  carelessness  and  incompetence;  and 
finally,  perchance,  the  entire  loss  of  a  month* s  or 
a  quarter's  rentals  through  the  absconding  and 
defalcation  of  the  agent. 

Owners  of  real  estate  must  devise  for  them- 
selves methods  of  protection  against  the  frauds 
of  dishonest  agents.  With  this  principal  object 
in  view,  the  first  rule  for  the  selection  of  real 
estate  agents  will  be  that  only  those  of  estab- 
lished reputations,  whose  businesses  are  apparently 
too  profitable  to  admit  of  fraudulent  actions,  are 
to  be  employed.  The  remaining  suggestions  will 
be  in  the  way  of  additional  precautions  against 


Real  Property  251 

the  possibilities  of  loss  by  the  frauds  and  mis- 
management of  agents.  Agents,  in  important 
cases,  may  be  requested  to  furnish  bonds  for  the 
faithful  performance  of  their  duties;  and  to  this 
proposition  many  agents  and  brokers  will  offer 
no  objection. 

Whenever  it  shall  become  necessary  to  replace 
agents  who  have  had  charge  of  real  estate  by  new 
ones,  notices  must  be  at  once  given  to  all  tenants 
to  discontinue  payments  of  rents  to  the  former 
agents  and  to  pay  the  rents  to  the  newly  appointed 
agents  until  further  notice. 

Commissions  for  the  sale  of  real  estate,  for 
the  leasing  of  improved  real  estate,  and  for  the 
collection  of  rents,  are  usually  in  the  form  of 
percentages. 

With  regard  to  all  kinds  of  real  estate  com- 
missions, prudent  investors  will  take  pains  to  have 
exact  understandings  with  agents  and  brokers 
before  the  commissions  shall  be  earned,  for  the 
excellent  reason  that  such  understandings  will 
often  be  the  means  of  preventing  the  charging  of 
exorbitant  commissions.  It  may  well  be  added 
that  there  will  be  no  impropriety  in  bargaining 
with  real  estate  agents  for  the  lowest  rates  of 
commissions  which  shall  be  consistent  with 
proper  performance  of  required  duties,  with- 
out regard  to  any  arrangements  or  rules  which 
may  have  been  made  by  real  estate  exchanges, 
or    other    associations    of   agents    and   brokers, 


252  The  American  Business  Woman 

for  the  maintenance  of  uniform  rates  of  com- 
missions. 

In  a  case  where  the  services  of  real  estate 
brokers  shall  have  been  performed  by  a  single 
person  or  firm,  there  can  be  no  difficulty  in  de- 
termining the  party  to  whom  the  commission 
shall  be  due;  but,  where  there  shall  be  several 
agents  or  brokers  concerned  in  a  single  trans- 
action, controversies  as  to  which  shall  be  en- 
titled to  the  commission  will  often  arise,  and  if 
the  commission  shall  be  paid  to  the  wrong  party, 
the  investor  may  be  put  to  the  inconvenience  of 
paying  it  a  second  time  to  the  rightful  party, 
without  the  possibility  of  recovering  it  from  the 
wrongful  one. 

The  deciding  legal  principle  in  such  cases  is 
that  the  agent  or  broker,  who  shall  be  the  "effi- 
cient or  procuring  cause"  of  the  particular  trans- 
action is  entitled  to  the  commission;  and  this 
principle,  although  somewhat  imsatisfactory,  can- 
not well  be  further  elucidated  in  a  work  of  this 
nature.  If  there  shall  be  serious  doubts  in  the 
mind  of  an  investor,  as  to  which  agent  or  broker, 
in  a  particular  transaction,  actually  was  the 
procuring  cause,  all  parties  who  may  have  claims 
to  the  commission,  should  be  interviewed  before 
the  payment  of  the  commission,  with  a  view  to 
an  arrangement  which  shall  be  satisfactory  to 
all  parties;  and  if  such  an  arrangement  cannot 
be  made,  the  investor  must  choose  between  the 


Real  Property  253 

alternatives  of  consulting  a  lawyer  and  of  taking 
the  chances  of  a  payment  to  the  wrong  person. 

With  respect  to  the  regular  commissions  of 
real  estate  agents,  for  the  general  management  of 
investment  real  estate,  such  as  renting,  the  col- 
lection of  rents,  the  making  of  repairs,  and  the 
exercising  of  the  usual  supervision,  a  simple  and 
satisfactory  arrangement  seems  to  be  that  the 
agents  shall  perform  all  the  regular  duties;  that 
they  shall  receive,  as  compensation,  each  month 
or  quarter,  agreed  percentages  of  the  gross 
amounts  of  rents  which  shall  have  been  collected 
during  the  period;  and  that  either  party  may 
terminate  the  agreement  by  giving  certain  notice 
to  the  other. 

The  actual  rates  of  percentages  of  commissions 
which  are  paid  to  real  estate  agents  vary  to  such 
an  extent  that  no  specific  figures  can  be  given; 
the  reasons  for  such  variations  will  evidently 
be  the  differences  between  localities,  the  ease  or 
difficulty  with  which  different  kinds  of  real  estate 
can  be  rented  and  the  rents  collected,  and  the 
relative  amounts  of  rentals  from  different  prop- 
erties. An  owner  who  shall  be  possessed  of  a 
large  amoimt  of  improved  real  estate,  in  the 
immediate  vicinity  of  the  real  estate  agents* 
places  of  business  may  reasonably  expect  to  pay 
lower  rates  of  commissions  than  one  whose 
investment  properties  shall  be  small  and  at  points 
which  are  remote  from  the  offices  of  the  agents; 


554  The  American  Business  Woman 

and  so  the  owner  of  a  large  office  building,  which 
shall  be  continuously  filled  with  prompt-paying 
tenants,  may  easily  obtain  first-class  agents  who 
will  take  charge  of  the  real  estate  at  low  rates  of 
commissions;  while  the  owner  of  low  class  tene- 
ment houses,  or  other  troublesome  buildings, 
which  shall  be  difficult  to  rent,  and  shall  offer 
greater  difficulties  to  the  prompt  collection  of  the 
rents,  will  be  obliged  to  pay  high  commissions 
in  order  to  obtain  satisfactory  agents. 

The  business  abilities  and  reputations  of 
agents  will  also  affect  the  rates  of  commissions 
(although  apparently  not  to  so  great  a  degree  as 
in  other  branches  of  business),  capable  and  re- 
sponsible agents  naturally  and  properly  requiring 
higher  compensations  than  will  suffice  for  those 
who  are  inexperienced  and  irresponsible. 


CHAPTER  IX 

LANDLORD  AND  TENANT 

HAVING  obtained  properly  conditioned,  and 
properly  improved  real  estate  for  the 
purposes  of  investment,  the  question  next  in 
order  will  be  concerning  the  best  means  by  which 
the  property  shall  be  made  to  produce  the  required 
incomes;  and  the  answer  evidently  must  be, 
**by  leasing  the  premises  to  satisfactory  tenants." 
This  is  the  universal  method  of  obtaining 
incomes  from  investments  in  real  estate.  We 
must,  therefore,  give  to  the  subject  the  attention 
which  its  great  importance  plainly  demands. 

Leases. — A  lease  is  called  an  indenture  of 
lease,  from  the  fact  that  formerly  certain  legal 
instruments  were  written  upon  parchment,  with 
some  word  written  in  the  spaces  between  the 
duplicate  parts,  and  were  then  cut  apart  with 
notched  or  indented  lines  through  the  particular 
word,  leaving  parts  of  each  letter  on  either  side 
of  the  lines,  as  a  means  of  identification  of  the 
duplicate  parts. 

A  lease  is  a  contract,  between  a  landlord  on  the 
255 


256  The  American  Business  Woman 

one  side  and  a  tenant  on  the  other,  which  gives  to 
the  tenant  the  possession  of  the  landlord's  real  es- 
tate, for  life,  for  a  certain  fixed  term,  or  at  will,  in 
consideration  of  the  rentals  which  are  agreed  to 
be  paid  by  the  tenant.  In  other  words,  a  lease 
is  a  contract,  or  an  instrument,  which  creates 
an  estate  in  land  for  life,  for  years,  or  at  will. 

The  regular  clauses  which  are  contained  in  an 
ordinary  lease  are  in  effect  as  follows : 

A  statement  that  A.  B.,  party  of  the  first  part 
(the  landlord)  has  leased  to  B.  C,  party  of  the 
second  part  (the  tenant)  certain  described  prem- 
ises, for  a  certain  specified  term,  at  a  specified 
rent,  payable  at  certain  times  and  in  certain 
specified  amounts;  a  covenant  that,  if  the  party 
of  the  second  part  shall  make  default  in  any  of 
the  covenants  of  the  lease,  the  party  of  the  first 
part  may  re-enter  the  premises,  and  remove  all 
persons  therefrom;  a  covenant  that  the  party 
of  the  second  part  will  pay  the  rent  in  the  manner 
specified  in  the  lease,  and,  at  the  expiration  of 
the  term,  or  sooner  termination  of  the  lease,  will 
quit  and  surrender  the  demised  premises  in  as 
good  a  condition  as  reasonable  wear  and  use 
thereof  will  permit,  damages  by  the  elements 
excepted;  a  covenant  of  quiet  enjoyment,  to  the 
effect  that  the  party  of  the  second  part,  upon 
paying  the  rent  and  performing  the  covenants 
of  the  lease,  shall  and  may  peaceably  and  quietly 
have,  hold,  and  enjoy  the  demised  premises  for 


Landlord  and  Tenant  257 

the  term  specified;  and  the  usual  conclusion, 
"In  witness  whereof  the  parties  to  these  presents 
have  hereunto  set  their  hands,  etc.,"  with  the 
signatures  of  the  parties,  attestation  clause 
("signed,  sealed  and  delivered  in  the  presence  of  "), 
and  the  signatures  of  the  witnesses. 

Such  a  lease  will,  obviously,  allow  to  a  tenant  a 
wide  latitude  in  the  use  of  the  premises  which 
are  demised  by  the  lease.  The  premises* may 
be  used  for  any  legitimate  business;  they  may 
be  used  and  occupied  at  all  hours  of  the  day  or 
night;  the  tenant  may  sublet  the  premises  or 
assign  the  lease  to  persons  and  uses  which  may 
be  entirely  unsatisfactory  to  the  owner — in  a 
word,  the  tenant  will  be  obliged  only  to  pay  the 
rent,  to  refrain  from  actually  abusing  the  premises, 
and  to  occupy  the  premises  for  purposes  which 
are  not  declared  by  the  law  to  be  unlawful. 

The  following  are  brief  descriptions  and  ex- 
planations of  covenants  which  should  be  in- 
cluded in  all  leases  under  which  circumstances 
may,  by  any  reasonable  possibility,  render  the 
special  covenants  desirable  from  the  owners' 
points  of  view: 

The  simple  clause  which  requires  the  tenant 
to  quit  and  surrender  the  premises  in  as  good  a 
state  and  condition  as  reasonable  use  and  wear 
thereof  will  permit  will  go  but  a  short  distance 
in  the  direction  of  protecting  premises  from 
actual    injuries;     for    the    scope   of    the    words 

'7 


258  The  American  Business  Woman 

''reasonable  use  and  wear,"  unless  their  significa- 
tion shall  be  modified  by  other  covenants,  or  facts, 
will  be  wide  enough  to  cause,  in  many  cases 
serious  damage  to  the  owners  of  real  estate. 
Reasonable  use  and  wear  of  a  building  which 
shaU  be  used  for  the  business  of  a  worker  in 
heavy  metals,  and  which  building  shall  not  be 
designed  for  such  purposes,  may  easily  result 
in  great  damage  to  the  premises.  So  the  nature 
of  many  other  branches  of  business  is  necessarily 
such  that  only  buildings  which  shall  be  especially 
constructed  will  be  able  to  endure  the  excessive 
wear,  without  serious  and  lasting  injuries.  The 
covenant,  on  the  part  of  the  tenant,  to  repair,  is 
broad  enough,  in  its  general  significance,  to 
relieve  the  landlord  of  the  expense  of  making 
the  repairs,  and  to  compel  the  tenant  to  make 
them  in  all  cases  where  tenants  shall  be  actually 
responsible,  or  shall  have  furnished  actually 
responsible  sureties. 

Although,  in  the  majority  of  cases  in  which  the 
amoimts  of  necessary  repairs  shall  not  be  large, 
the  owners  will  find  it  to  their  advantage  to  make 
the  repairs  themselves,  in  preference  to  the  diffi- 
culties of  legal  proceedings  against  tenants;  still 
there  will  always  be  possibilities  of  extensive 
damage  to  leased  premises,  involving  heavy 
expenditure,  and  against  these  owners  must 
endeavor  to  protect  themselves.  The  covenant 
which    requires    tenants    to    make    repairs    will, 


Landlord  and  Tenant  ^$9 

moreover,  often  exercise  a  restraining  effect  upon 
tenants  who,  otherwise,  will  show  very  little 
regard  for  the  properties  of  their  landlords;  for 
tenants,  as  a  class,  be  they  ever  so  responsible, 
are,  like  the  majority  of  mankind,  at  least  willing 
to  avoid  trouble  and  legal  complications  which 
interfere  materially  with  proper  attention  to 
business  when  the  cost  of  such  avoidance  will 
be  only  the  using  6f  the  premises  which  they 
occupy  in  reasonably  careful  manners.  The 
covenant  which  is  in  question  may  also  be  the 
means  of  preventing  suits  against  landlords  for 
damages  growing  out  of  alleged  personal  in- 
juries, which  shall  be  due  to  negligence  with  regard 
to  the  conditions  of  their  premises;  or  at  least 
the  covenant  will  often  furnish  a  legal  recourse 
against  tenants  in  cases  of  such  suits  for  damages. 
So,  also,  the  covenant  will  prevent  claims  by 
tenants  for  damage  from  leaking  roofs,  defective 
plumbing,  etc.,  as  well  as  removing  legal  reasons 
for  quitting  premises,  under  the  statutory  eviction 
acts,  which  allow  tenants  to  surrender  premises 
which  have  become  untenantable. 

A  clause  which  is  known  as  the  *'fire  clause" 
is  commonly  included  in  leases,  for  the  purpose 
of  making  definite  provisions  for  the  effects  of 
possible  fires  upon  leases.  The  clause  is  to  the 
effect  that  if  the  buildings  upon  the  demised 
land  shall  be  partially  damaged  by  fire  they  shall 
be  repaired  by  the  landlords;  in  case  the  damage 


26o  The  American  Business  Woman 

shall  be  so  extensive  as  to  render  the  buildings  un- 
tenantable, the  rents  shall  cease  until  such  times 
as  the  buildings  shall  be  put  in  complete  repair; 
and  in  case  the  premises  shall  be  totally  destroyed 
by  fire  or  otherwise,  the  rents  shall  be  paid  up 
to  the  time  of  such  destruction,  and  then  and 
from  thenceforth  the  leases  shall  cease  and  come 
to  an  end;  provided  the  damage  or  destruction 
shall  not  be  caused  by  the  carelessness,  negli- 
gence, or  improper  conduct  of  the  tenants  or 
their  agents  or  servants. 

A  covenant,  which  should  be  included  in  all 
leases,  except  those  of  premises  which  are  to  be 
used  for  businesses  which  will  necessarily  place 
insurance  rates  at  the  highest,  is  that  by  which 
tenants  agree  that  they  will  not  occupy  demised 
premises  for  purposes  which  are  deemed  to  be 
extra  hazardous.  This  covenant  is  often  in- 
cluded in  one  which  contains  also  a  clause  against 
assigning  the  lease  or  making  alterations  in  the 
demised  premises;  thus,  the  tenant  covenants 
that  he  "will  not  assign  this  lease,  nor  let,  nor 
underlet  the  whole  or  any  part  of  the  said  prem- 
ises, nor  make  any  alteration  therein,  without 
the  written  consent  of  the  party  of  the  first  part, 
under  penalty  of  forfeiture  and  damages;  and 
that  he  will  not  occupy  or  use  the  said  premises, 
nor  permit  the  same  to  be  occupied  or  used,  for 
any  business  deemed  extra  hazardous  on  account 
of  fire  or  otherwise,   without   the  like  consent, 


Landlord  and  Tenant  261 

under  the  like  penalty.'*  This  entire  covenant 
may  well  be  contained  in  leases  generally. 

Every  properly  drawn  lease  should  contain  a 
covenant  to  the  effect  that  the  tenant  will  occupy 
the  leased  premises,  and  allow  the  same  to  be 
occupied,  only  for  specified  purposes,  unless  upon 
the  written  consent  of  the  landlord. 

In  general,  landlords  have  no  right  to  trespass 
upon  their  premises,  while  the  possession  of  the 
premises  shall  belong  to  their  tenants.  Un- 
pleasant, if  not  serious  difficulties,  with  regard 
to  just  what  acts  of  the  landlord  will  constitute 
a  trespass  against  the  tenant,  may  be  easily 
avoided  by  including  in  leases  clauses  which  shall 
provide  properly  for  such  occasions.  Leases 
may,  therefore,  specify  that  the  landlords  shall 
have  the  right  to  show  the  premises  at  reasonable 
hours  to  persons  wishing  to  purchase  or  hire;  to 
put  notices  **for  sale"  or  "to  let"  upon  the 
buildings  at  certain  times  of  the  year;  and  to  enter 
the  premises,  at  proper  and  reasonable  hours, 
for  purposes  of  inspection,  making  alterations, 
repairs,  etc. 

Still  another  clause  which  will  be  found  to  be 
beneficial  to  the  owners  of  premises  which  are 
situated  in  cities  or  villages  having  various 
departments,  etc.,  is  a  covenant  by  which  tenants 
shall  agree  promptly  to  execute  and  comply  with 
all  rules,  orders,  and  regulations  of  the  city 
government   and  its   departments,   and  also  to 


262  The  American  Business  Woman 

execute  and  comply  with  all  rules  and  orders  of 
the  fire  underwriters  for  the  prevention  of  fire. 

The  general  rule  with  regard  to  the  agreements 
which  should  be  contained  in  leases  in  special 
cases  must  be  that  there  shall  be  no  verbal  agree- 
ments of  importance  between  landlords  and  ten- 
ants; that  is,  that  all  special  agreements  between 
landlords  and  tenants  shall  be  carefully  included 
in  the  written  leases. 

Covenants  against  nuisances,  machinery,  steam 
boilers,  or  heavy  loads;  covenants  to  prevent 
occupancy  of  premises  during  the  night  hours  or 
on  Sundays  and  legal  holidays;  and  covenants 
providing  for  the  payment  of  water  rents  or 
taxes,  and  gas  bills,  in  cases  of  extraordinary 
consumption  of  water  or  gas,  may  be  included  in 
leases  in  the  proper  cases.  And  finally,  in  all 
important  cases,  landlords  should  look  well  after 
their  own  interests  in  the  drawing  of  their  leases, 
understanding  fully  the  fact,  that  ambiguous  and 
uncertain  agreements  between  landlords  and 
tenants  will,  more  often  than  otherwise,  meet 
with  judicial  constructions  which  will  result 
to  the  advantage  of  the  tenants. 

In  the  case  of  a  large  building  which  shall  be 
occupied  by  a  number  of  tenants,  an  excellent 
plan,  with  regard  to  the  proper  restriction  of 
the  various  tenants,  is  the  adoption  of  a  number 
of  suitable  rules  and  regulations  for  the  building, 
a  printed  copy  of  the  niles  being  attached  to  each 


^  Landlord  and  Tenant  263 

lease,  and  each  lease  containing  a  covenant,  on 
the  part  of  the  tenant,  to  comply  with  and  execute 
the  rules  and  regulations  of  the  building. 

Concerning  the  terms  or  durations  of  leases 
generally — whether  long  terms  or  short  terms  will, 
in  the  main,  be  most  advantageous  to  owners  of 
real  estate — it  is  evident  that  the  rule  must  depend 
upon  particular  circumstances  in  each  special 
case;  although,  in  a  certain  broad  sense,  it  may 
be  said  that  long-continued  and  uninterrupted 
occupancy  by  a  single  tenant  is  deemed  to  be  of 
material  advantage  to  premises  which  shall  be 
so  occupied. 

Considering  the  question  to  be  dependent  solely 
upon  the  amounts  of  rentals  which  shall  be  ob- 
tained, landlords  must  exercise,  to  the  best  of 
their  abilities,  their  judgments  with  regard  to 
future  conditions,  seeking  responsible  tenants  for 
long  terms  when  there  shall  be  prospects  of  lower 
prevailing  rents  in  the  future,  and  giving  leases 
only  for  short  terms  when  the  prevailing  rents 
in  the  neighborhoods  of  their  premises  are  likely 
to  become  higher. 

The  possibility  of  difficulties  which  are  es- 
pecially attendant  upon  long  leases  have  induced 
many  landlords  to  adopt  the  practice  of  giving 
only  very  short  leases — commonly  (especially 
with  tenement  houses,  apartment  houses,  and 
certain  kinds  of  loft  buildings  and  small  office 
buildings)  only  from  month  to  month — the  theory 


264  The  American  Business  Woman 

being  that  all  care  and  difficulty  in  the  drawing 
of  leases  may  thus  be  dispensed  with,  because 
all  undesirable  tenants  may  be  turned  out  of  the 
premises  before  they  shall  have  had  opportunities 
for  extensive  injuries.  This  method  of  very 
short  terms  will  afford  an  easy  solution  of  the 
difficulty  in  cases  where  irresponsible  tenants  will 
be  in  the  majority;  it  is  especially  useful  in  cases 
of  apartment  buildings,  where  the  danger  of 
occupancy  by  tenants  who  will  use  the  premises 
for  disreputable  and  illicit  purposes  is  a  serious 
consideration.  But,  on  the  other  hand,  tenants 
who  shall  be  in  all  respects  first  class  cannot 
easily  be  induced  to  accept  such  temporary  ar- 
rangements, being  naturally  imwilling  that  their 
possession  of  residences  and  of  business  places 
shall  be  to  so  great  an  extent  precarious.  So, 
tenants  who  shall  propose  to  expend  considerable 
amounts  in  the  preparing  of  premises  for  the 
purposes  of  their  occupancies, — in  decorations, 
in  the  erection  of  machinery  or  trade  fixtures,  in 
the  costly  moving  of  extensive  stocks  in  trade, 
or  of  valuable  furniture, — will  not  be  willing  to 
incur  expenses  of  this  kind  unless  their  leases 
shall  assure  them  of  possessions  of  the  premises 
for  at  least  reasonable  terms. 

Long-continued  occupancies  of  buildings  by 
the  same  tenants  will,  without  doubt,  prove  to 
be  beneficial  to  the  general  reputations  of  the 
buildings  among  tenants,  as  indicating  landlords. 


Landlord  and  Tenant  265 

rents,  business  facilities,  and  general  conveniences 
which  will  be  generally  satisfactory  to  tenants; 
and  conversely,  too  frequent  changes  among  the 
tenants  of  buildings  will  not  fail  to  suggest  to 
tenants  generally  the  fact  that  something  must 
be  wrong  with  the  premises,  and  will  give  to  the 
buildings  bad  reputations  which  will  often  prove 
to  be  seriously  injurious.  So  also  the  amounts 
which  must  necessarily  be  expended  for  repairs 
upon  buildings  will  be  much  less  in  cases  of  long 
leases  than  in  cases  of  short  ones;  and  the  same 
will  be  true  with  regard  to  loss  of  rentals  which 
is  due  to  vacancies  while  making  repairs  and 
obtaining  new  tenants. 

An  important  objection  to  long  leases  is  that 
they  will  often  interfere  with  the  sales  or  other 
proposed  dispositions  of  the  premises  upon  which 
they  are  incumbrances,  many  purchasers  of  real 
estate  desiring  the  immediate  and  free  and  clear 
possession  of  premises  which  they  shall  purchase, 
for  purposes  of  their  own ;  moreover,  tenants  often 
take  advantage  of  such  circumstances  to  exact 
exorbitant  sums  from  those  for  whom  it  may  be 
necessary  to  purchase  the  discharges  of  the  leases. 
If,  therefore,  there  shall  be  probabilities  that  it 
will  be  necessary  or  advisable  to  sell  a  particular 
piece  of  improved  real  estate  in  the  near  future, 
or  to  make  any  other  particular  disposition 
requiring  the  unincumbered  possession  of  the 
property,  the  terms  of  the  leases  must  be  regu- 


266  The  American  Business  Woman 

lated  accordingly.  With  this  end  in  view,  leases 
for  considerable  terms  are  sometimes  given,  with 
covenants  to  the  effect  that,  if  the  owners  shall 
desire  to  sell  the  premises,  during  the  terms  of 
the  leases,  they  shall  give  certain  written  notices 
to  the  tenants,  and  that  the  tenants  will  there- 
upon quit  and  surrender  the  premises  to  the 
landlords. 

Similarly,  if  there  shall  be  several  tenants  in 
one  building,  the  various  leases  should  be  so 
termed  that  all  will  expire  upon  the  same  date; 
for,  otherwise,  a  single  tenant,  occupying  ever 
so  small  a  portion  of  the  premises,  will,  if  the 
unexpired  term  of  his  lease  shall  be  sufficient, 
be  able  to  demand  his  own  price  for  the  surrender 
of  the  small  portion,  without  which  the  possession 
of  the  premises  will  be  useless. 

A  common  and  very  unwise  practice  among 
landlords  is  to  give  to  their  tenants  privileges 
or  options  for  extensions  of  the  terms  beyond 
those  which  are  specified  in  the  leases. 

Such  agreements  will  evidently  have  the  effect 
of  binding  the  landlords  to  long  terms,  while 
the  tenants  will  be  free  to  choose  for  themselves 
the  lengths  of  their  terms.  If,  in  such  a  case, 
rents  in  the  particular  neighborhood  shall  show 
tendencies  of  decreasing,  the  landlord  must  ex- 
pect his  tenant  to  choose  a  short  term,  and  then 
perhaps  to  take  himself  to  other  premises  at 
lower  rents;  and  if  the  rents  in  the  neighborhood 


Landlord  and  Tenant  267 

shall  give  indications  of  becoming  higher,  the 
landlord  will  derive  no  advantage  from  the  cir- 
cumstance, for  his  tenant  will  demand,  and  may 
lawfully  obtain,  an  extension  of  his  term  at  the 
former  low  rents.  For  these  reasons,  privileges 
of  further  terms  should  never  be  given,  except 
in  cases  where  such  disadvantageous  concessions 
shall  be  absolutely  necessary  for  the  renting  of 
premises;  and  where  such  concessions  cannot  be 
avoided  tenants  should  be  required  to  give  to 
their  landlords  ample  notices  of  their  intentions 
with  regard  to  the  extensions  of  their  terms. 

Security  for  Rent. — If,  by  some  unfailing 
method,  all  danger  of  losing  rents  could  be  re- 
moved, and  the  tenants'  prompt  payment  of 
rentals  could  be  positively  assured,  the  question 
of  the  exact  times  of  the  payments — whether  in 
advance  or  otherwise,  by  the  month  or  by  the 
quarter — would  become  merely  one  of  mutual 
convenience  between  landlords  and  tenants.  But 
the  fact  is  that  landlords  cannot  safely  rely  upon 
the  responsibilities  of  tenants  generally;  notwith- 
standing all  such  precautions  as  the  obtaining 
of  references,  statements  regarding  financial  re- 
sponsibilities, and  even  the  requiring  of  securities 
for  the  rents,  owners  of  real  estate  must  seek,  by 
the  manners  in  which  the  payments  of  rents  shall 
be  required,  to  find  additional  assurances  of  the 
tenants'  prompt  performances  of  their  covenants. 


268  The  American  Business  Woman 

Hence  the  common  practice  of  making  rents 
payable  monthly  in  advance,  or  quarterly  in 
advance. 

This  method,  although  it  may  be  a  step  in  the 
right  direction,  must  receive  no  higher  commenda- 
tion than  it  actually  deserves.  While  it  is  often 
thoughtlessly  looked  upon  as  being  equivalent 
to  an  actual  security  for  rents,  even  if  promptly 
complied  with,  it  will,  in  fact,  amount  merely 
to  a  security  for  the  rents  for  the  periods  between 
the  times  of  payments.  If  the  rent  of  certain 
premises  shall  be  payable  monthly,  and  not  in 
advance,  the  irresponsible  tenant,  by  quitting 
the  premises  at  the  end  of  the  month,  and  before 
the  payment  of  rent  for  the  particular  month  shall 
have  been  made,  may  defraud  his  landlord  of 
one  month's  rent;  while,  if  the  rent  shall  be 
payable  monthly  in  advance,  the  rent  for  the 
particular  month  will  have  been  secured  to  the 
landlord,  if  the  landlord  shall  insist  upon  proper 
punctuality,  by  its  previous  payment.  If  the 
payments  of  rents  shall  be  quarterly,  at  the  end 
of  each  quarter,  the  landlord  may  be  defrauded 
of  three  months*  rent  by  the  tenants  disap- 
pearance at  the  end  of  a  quarter  without  the 
payment  of  the  quarter's  rent;  while,  if  the 
quarterly  payments  of  rents  shall  have  been  made 
in  advance,  the  schemes  of  the  dishonest  tenants 
will  evidently  come  to  naught.  It  follows  that 
landlords  may  advantageously  strive  to  receive 


Landlord  and  Tenant  269 

the  payments  of  their  rentals  as  far  in  advance 
as  possible. 

The  determination  of  the  numerical  amounts 
of  rentals  which  will  be  necessary  for  satisfactory 
investments  in  real  estate,  is,  as  has  been  shown, 
a  comparatively  simple  matter  of  arithmetical 
calculation.  The  securing  of  rentals,  or  the 
making  of  their  collection  sure,  will  in  most 
cases  prove  to  be  an  entirely  different  matter. 
This  question  it  is,  with  its  attendant  and  constant 
arrears  of  rents,  and  suits  and  proceedings  at 
law  to  enforce  their  payments,  which  presents  to 
the  majority  of  landlords  their  greatest  diffi- 
culties. Having  been  deprived  generally,  by 
changes  in  the  laws,  of  former  remedies  for  the 
enforcement  of  the  payment  of  rents;  having 
no  adequate  means  of  collecting  rents  from  irre- 
sponsible tenants,  or  from  tenants  who  may  be- 
come irresponsible  at  will;  and  having  no  redress 
from  the  continued  failure  of  tenants  to  pay  their 
rents,  except  the  ousting  of  the  tenants,  and  the 
consequent  vacating  of  the  premises;  landlords, 
as  a  class,  find  themselves  confronted  by  per- 
plexities the  solutions  of  which,  in  many  cases, 
appear  to  be  well-nigh  impossible. 

The  question  of  making  the  collection  of  rents 
sure  will,  evidently  present  the  least  difficulties 
in  cases  where  real  estate  shall  be  so  conditioned 
as  to  be  in  regular  demand  by  tenants  of  the  most 
responsible    characters;    and    the    greatest    diffi- 


270  The  American  Business  Woman 

culties  will  be  present  in  cases  where  there  shall 
be  such  scarcities  of  tenants  or  where  tenants 
shall  be  of  such  irresponsible  characters  that 
landlords  must  choose  between  the  chances  of 
considerable  losses  of  rents  and  the  certainty 
that  their  buildings  will  stand  vacant  and 
idle. 

In  the  discussion  of  the  various  methods  of 
securing  rents  and  of  the  characters  of  tenants 
generally,  it  will  evidently  be  necessary  to  set  out 
with  the  assumption  that  the  real  estate  to  which 
the  discussion  will  be  applicable  shall  be,  at  the 
worst,  of  such  characters  as  to  permit  of  some 
choice  with  regard  to  tenants.  In  other  words, 
the  discussion  will  apply  only  to  real  estate  which 
shall  be,  at  least,  not  below  the  average  with 
regard  to  renting  qualities.  Owners  of  real 
estate,  which  shall  be  below  this  standard  in 
character,  must  strive  to  bring  out  the  best 
possible  results,  against  adverse  circumstances, 
obtaining  the  best  available  securities  whenever 
possible,  and  renting  their  premises  without 
securities,  when  the  only  alternative  shall  be  the 
vacancy  of  the  premises. 

All  methods  of  securing  the  rents  from  real 
estate  may  be  included  in  two  general  classes  of 
tenancies :  first,  that  in  which  the  tenants  them- 
selves shall  be  of  undoubted  responsibilities;  and 
second,  that  in  which  the  tenants,  not  necessarily 
responsible  themselves,  shall  furnish  responsible 


Landlord  and  Tenant  2yt 

sureties,  or  other  practical  security  for  the  per- 
formance of  their  covenants. 

Just  what  elements  must  go  to  make  up  ths 
undoubted  responsibility  of  tenants  which  is 
required  in  the  first  class,  especially  in  our  times 
of  rapidly  changing  circumstances  and  of  in- 
creasing difficulties  in  the  way  of  enforcing 
obligations,  and  just  how  the  necessary  responsi- 
bility may  best  be  determined,  are  questions 
which  are  not  without  serious  difficulty. 

In  many  cases,  financial  responsibility  will  be 
found  to  be  of  an  extremely  transient  nature. 
The  responsible  man  of  to-day  may  (by  the  em- 
ployment of  some  simple  means  of  transferring 
his  property)  in  a  short  time  transform  himself 
into  one  against  whom  judgments  will  prove  to 
be  not  worth  their  costs. 

The  person  of  real  financial  responsibility  must 
be  one  who  not  only  shall  be  the  owner  of  ample 
property,  over  and  above  all  debts  and  obliga- 
tions,— property  which  can  be  sold  under  exe- 
cution— but  also  one  who,  because  of  well-known 
and  long-established  character  for  stability  and 
substantial  qualities,  is  likely  to  remain  in  the 
possession  of  his  property.  He  must  be  engaged 
in  no  hazardous  business;  he  must  be  no  specu- 
lator, no  indorser  or  discounter  of  notes,  no 
commercial  weather-cock. 

There  are  in  most  of  the  cities  of  our  country 
certain  business  firms  which  have  been  for  many 


272  The  American  Business  Woman 

years  engaged  in  the  same  line  of  business,  and 
the  reputations  of  which  for  stability  and  responsi- 
bility seem  to  have  been  long  ago  perfectly  es- 
tablished. Such  firms  or  persons  will  generally 
prove  to  be  satisfactory  tenants  in  all  respects, 
and,  unless  there  shall  be  reasons  to  suspect 
changing  circumstances,  are,  in  general,  much 
to  be  desired  as  tenants.  But  in  such  cases 
landlords  may  well  have  a  care  that  the  highly 
reputable  firms  or  persons  shall,  themselves,  be 
identified  with  and  bound  by  the  leases — that 
the  leases  shall  not  be  signed  by  agents  or  attor- 
neys, who  may  be  found  to  have  no  authorities 
to  bind  the  responsible  parties. 

Probably  one  of  the  best  methods  for 
determining  the  business  characters  and  responsi- 
bilities of  proposed  tenants  will  be  the  employ- 
ment of  the  mercantile  agencies  which  have  been 
formed  for  the  purposes  of  such  investigations. 
The  reports  of  the  mercantile  agencies  are  often 
very  accurate  and  complete,  giving  statements 
of  former  occupations,  general  reputations,  owner- 
ship of  real  estate  or  of  other  property,  unsatisfied 
judgments  and  legal  or  financial  difficulties  of 
the  persons  or  firms  whose  reputations  shall  be 
examined  by  them.  In  this  manner  facts  of 
importance,  which  may  be  discovered  otherwise 
only  with  great  difficulty,  will  often  be  disclosed. 

There  are  several  different  methods  by  which 
tenants,    although    they    may    be    entirely    irre- 


Landlord  and  Tenant  273 

sponsible  themselves,  may  fiimish  satisfactory 
securities  for  the  payments  of  their  rents,  and 
for  the  performance  of  their  covenants.  The  first 
method  to  be  mentioned,  as  perhaps  the  most 
common,  is  the  furnishing  of  responsible  sureties, 
or,  in  other  words,  the  furnishing  of  responsible 
and  satisfactory  persons  who  shall  agree  to  make 
good  any  deficiencies  on  the  parts  of  the  tenants. 
With  regard  to  the  responsibilities  of  sureties, 
the  rules  and  suggestions  which  have  already 
been  given  for  the  determination  of  the  responsi- 
bilities of  tenants,  must  be  closely  observed,  with 
only  such  modifications  as  will  be  suggested  by 
the  fact  that  the  sureties  themselves  may  be 
neither  tenants  nor  business  men.  Sureties  should 
invariably  be  required  to  sign  written  agreements, 
by  which  they  shall  bind  themselves  to  become 
sureties  for  the  prompt  payment  of  the  rents  and 
for  the  proper  performance  of  all  the  covenants 
of  the  tenants,  and  by  which  they  shall  promise 
to  pay  to  the  landlords  any  arrears  of  rents  and 
any  damage  which  they  may  sustain  by  reason 
of  the  non-performance  of  the  tenants*  covenants. 
Tenants  may  also  provide  what  appears  to  be 
a  most  satisfactory  kind  of  sureties,  by  the  em- 
ployment of  first-class  surety  companies,  or  other 
corporations  which  are  organized  for  the  purpose 
of  guaranteeing  the  performance  of  the  agreements 
of  others.  In  all  cases  of  sureties,  owners  of 
real  estate  must  make  use  of  independent  judg- 


274  The  American  Business  Woman 

ment  applicable  to  the  special  conditions  of  the 
cases,  computing,  if  necessary,  the  actual  costs 
to  them  of  the  proposed  sureties,  and  deciding 
from  all  the  circumstances  whether  security,  and 
if  any,  just  what  kind,  will  prove  to  be  to  their 
advantage. 

With  the  exceptions  which  have  been  suggested, 
it  may  be  remarked  that,  with  respect  to  de- 
sirability, the  method  of  sureties  may  be  placed 
in  the  same  class  with  that  of  responsible  tenants, 
both  methods  depending  eventually  upon  questions 
of  personal  responsibility. 

We  now  come  to  the  consideration  of  the 
method  of  making  the  collection  of  rents  sure, 
which,  under  proper  conditions,  may  be  regarded 
as  the  most  perfect  and  satisfactory  of  all  prac- 
tical methods,  to  wit:  that  of  requiring  tenants 
to  expend  considerable  amounts  in  the  improve- 
ment of  the  premises,  prior  to,  or  as  soon  as 
possible  after,  the  commencements  of  their 
occupancies.  No  argument  will  be  necessary  to 
prove  the  statement  that  a  tenant  who  shall  have 
expended  large  sums  of  money  in  permanent 
improvements  upon  his  landlord's  premises  will 
be  very  loth  to  leave  the  premises  before  the 
expiration  of  his  term  for  the  purpose  of  avoiding 
the  payment  of  the  rent ;  it  is  equally  evident  that, 
if  the  expenditures  of  the  tenant  shall  have  been 
properly  directed  by  the  landlord,  they  will  be 
able  to  afford  ample  compensations  for  any  losses 


Landlord  and  Tenant  275 

of  rents  which  the  landlord  may  siiffer  by  reason 
of  the  tenant's  default  in  payment,  or  the  tem- 
porary vacating  of  the  premises. 

Owners  of  real  estate,  having  taken  care  that 
the  improvements  which  shall  be  made  by  their 
tenants  are  actual  benefits  to  the  premises,  may 
also  take  into  consideration  the  values  of  the 
improvements,  which  will  revert  to  them  without 
direct  expenditure,  before  determining  the  total 
profits  which  will  accrue  to  them  from  the 
transactions. 

The  first  condition  which  will  be  necessary  for 
the  success  of  the  method  will  evidently  be,  that 
the  agreements  of  proposed  tenants  with  regard 
to  the  making  of  expenditures  upon  demised 
premises  shall  be  assured  of  fulfilment.  It  will 
be  scarcely  necessary  to  remark  that  the  danger 
of  disagreements  and  the  consequent  failures  of 
the  proposed  arrangements  will  be  at  its  greatest 
before  the  expenditures  by  the  tenants  shall  have 
been  made,  or,  in  other  words,  before  the  se- 
ctuities  shall  have  been  fully  established;  and, 
therefore,  that  there  will  be  need  of  great  care 
and  attention  on  the  parts  of  owners  during 
the  construction  of  the  improvements.  For  in  the 
establishment  of  the  securities  lies  the  gist  of 
the  entire  plan.  Especially  will  there  be  need  of 
caution  in  this  respect  when  the  nature  of  pro- 
posed improvements  shall  be  such  as  to  require 
the   tearing   down   of   portions   of   the   demised 


276  The  American  Business  Woman 

premises,  or  such  preliminary  alterations  as  will 
cause  serious  injuries  to  the  premises,  and  losses 
to  the  owners,  in  case  the  proposed  improvements 
shall  not  be  completed.  The  usual  plan  of 
assuring  the  completion  of  promised  improve- 
ments is  that  of  requiring  tenants  to  furnish 
good  and  sufficient  bonds,  executed  by  themselves 
and  by  one  or  more  other  responsible  persons, 
conditioned  for  the  faithful  performance  of  the 
agreements  concerning  the  improvements,  and 
providing  for  the  payment  to  the  owners  of  all 
damages  which  may  occur  to  them  through 
failures  of  tenants  to  complete  the  proposed 
improvements.  The  satisfactory  working  of  this 
plan  evidently  will  depend  upon  the  financial 
responsibilities  of  the  bondsmen;  and,  according 
as  there  shall  be  possibilities  of  injuries  to  the 
owners,  through  the  failures  of  tenants  to  com- 
plete improvements  which  have  been  agreed 
upon,  owners  must  apply  with  diligence  the  rules 
and  principles  which  have  already  been  ex- 
plained for  the  determination  of  personal  financial 
responsibilities. 

For  the  purposes  in  question,  bonds,  upon  the 
legal  sufficiency  of  which  so  much  may  depend, 
must  be  carefully  drawn  so  as  to  include  all 
necessary  covenants  and  recitals  and  so  as  to 
bind,  jointly  and  severally,  all  the  persons  by 
whom  they  shall  be  signed.  Ordinarily,  it  is 
plain  that  the  greater  the  number  of  the  signers 


Landlord  and  Tenant  277 

of  such  a  bond  shall  be,  the  greater  will  be  the 
chances  of  responsibility  among  them. 

In  all  cases  in  which  tenants  shall  agree  to 
make  improvements  upon  the  real  estate  of  their 
landlords,  the  clauses  in  the  leases,  which  provide 
for  the  improvements,  should  specify  the  exact 
kinds  and  natures  of  the  proposed  improvements, 
and  should  require  the  full  completion  of  the 
improvements  at  as  early  specified  times  as  will 
be  practicable  under  the  circumstances. 

Ground  Leases. — A  form  of  leasing  real 
estate  which  appears  to  be  most  advantageous 
to  the  owners,  inasmuch  as  it  exemplifies  in  a 
high  degree  the  method  of  securing  rents  by  im- 
provements, and  in  other  respects  which  will  be 
apparent  without  difficulty,  is  by  means  of  what 
are  commonly  known  as  "ground  leases,"  the 
poptilar  name  having  been  derived  from  the  fact 
that  such  leases  ordinarily  apply  only  to  vacant 
or  unimproved  land. 

A  ground  lease  of  real  estate  gives  to  the  tenant 
a  comparatively  long  term,  and  provides  that 
the  tenant  shall  erect  upon  the  land  certain 
specified  buildings,  at  his  own  cost  and  expense. 
The  tenant  agrees  to  pay  all  taxes,  assessments, 
and  charges  of  every  description,  which  are  or 
may  be  liens  upon  the  premises;  to  insure  the 
buildings  for  the  benefit  of  the  landlord;  to  re- 
build the  buildings  in  case  of  destruction,  the 


278  The  American  Business  Woman 

insurance  being  applied  thereto ;  and  to  pay  to  the 
owner  of  the  land  certain  rents,  specified  in 
amounts  and  as  to  the  times  and  manners  of 
payments,  and  which  may  be  uniform  throughout 
the  term,  or  may  increase  during  certain  periods 
of  the  term.  At  the  expiration  or  termination 
of  the  lease  the  improvements  may  revert,  without 
cost,  and  free  and  clear  of  all  incumbrances,  to 
the  owners  of  the  land;  or  the  lease  may  require 
the  owners  of  the  land  to  purchase  the  improve- 
ments at  appraised  values,  according  to  the 
length  of  the  term,  the  cost  of  the  improvements, 
and  the  amount  of  the  rentals. 

The  terms  of  ground  leases  are  sometimes  very 
long  (ninety -nine  years,  or  even  a  greater  number 
being  not  unusual),  and  sometimes,  though  more 
rarely,  the  terms  extend  indefinitely — forever — 
in  which  cases  the  leases  are  said  to  be  perpetual, 
and  the  term  "fee-leasehold"  has  been  applied 
to  the  estates  of  the  tenants.  Another  form  of 
ground  lease  is  similar  to  the  one  which  has  been 
described,  except  that  the  term  is  usually  much 
shorter,  and  the  lease  contains  a  provision  that 
at  the  expiration  of  the  term,  the  landlord  shall 
have  the  option  of  purchasing  the  improvement 
at  specified  or  appraised  values,  or  of  granting 
a  renewal  of  the  lease  for  a  specified  term  and  at 
specified  or  appraised  rents. 

A  ground  lease  may  specify  that  there  shall  be 
several   successive   extensions    (or   even   for   an 


Landlord  and  Tenant  279 

indefinite  number — forever),  with  or  without  an 
option  of  purchasing  the  improvements,  and  that, 
at  the  final  expiration  or  termination  of  the  lease 
the  improvements  shall  revert  to  the  landlord, 
or  that  they  shall  be  purchased  by  the  landlord 
at  appraised  values. 

With  regard  to  these  two  methods  of  acquiring 
finally  the  improvements,  it  is  evident  that  the 
cost  of  the  improvements,  together  with  the 
elements  of  the  amounts  of  rentals,  and  lengths 
of  terms,  will  go  far  in  deciding  between  the  two. 
But  where  a  choice  in  this  respect  shall  be  offered 
to  the  owners  of  real  estate,  the  method  by  which 
the  improvements  will  revert  to  them  without 
cost  is  to  be  preferred  in  all  cases  where  the  owners 
of  the  real  estate  may  otherwise  nm  the  risk  of 
serious  embarrassment  by  being  compelled  to' 
pay  large  sums  for  the  improvements,  which, 
under  the  certainty  that  they  will  not  be  lost 
by  the  tenants,  may  assume  far  greater  propor- 
tions than  the  landlords  may  have  had  reasons 
to  expect. 

A  common  provision  in  groimd  leases,  with 
regard  to  the  amounts  of  the  annual  rents,  is  that 
for  the  first  regular  term  (the  term  before  the 
first  renewal)  the  rent  shall  be  equal  to  a  clear, 
net  five  per  cent,  upon  the  value  of  the  partictdar 
demised  land;  that,  for  the  term  of  each  subse- 
quent renewal,  it  shall  be  equal  to  a  clear,  net 
five  per  cent,  upon  the  appraised  value  of  the 


28o  The  American  Business  Woman 

land  at  the  time  of  such  renewal ;  and  that  in  no 
case  shall  the  annual  rent  for  the  term  of  a  re- 
newal be  less  than  that  for  the  preceding  term. 

The  principal  general  characteristics  of  ground 
leases  having  been  sufficiently  explained,  their 
peculiar  advantages  may  be  stated  as  follows : 

First,  there  will  be  a  remarkably  perfect  se- 
curity for  the  rentals;  for,  with  proper  care  in 
the  drawing  of  the  leases  and  in  the  securing 
of  the  improvements,  a  necessary  loss  of  rentals 
will  imply  a  well-nigh  impossible  concurrence  of 
such  events  as  the  failure  of  the  tenants,  the 
destruction  of  the  buildings,  the  failure  of  the 
insurance  companies,  and  the  failiu'e  of  the  land 
to  enhance  in  values. 

Second,  investments  of  this  description  will 
have  the  advantages  of  permanent  and  lasting 
characters,  and  of  the  many  attendant  benefits. 

Third,  investors  in  ground  leases  will  experience 
great  relief  from  the  cares  and  difficulties  which 
are  inseparable,  generally  speaking,  from  the 
management  of  improved  real  estate.  For,  with 
well-arranged  ground  leases,  the  necessary  tasks 
of  the  landlords  may  be  reduced  to  the  simple 
and  precautionary  ones  of  looking  up  unpaid 
taxes  and  assessments  and  notifying  the  tenants 
to  pay  any  arrears;  occasionall^r  making  in- 
spections of  the  premises,  in  order  that  they  may 
not  be  allowed  to  become  out  of  repair;  and 
keeping  in  mind  the  dates  of  expirations  of  in- 


Landlord  and  Tenant  281 

surance  policies,  in  order  that  they  may  not  lapse 
or  become  inoperative. 

Fourth,  ground  leases  will  provide  the  advan- 
tageous improvement  of  real  estate  which,  be- 
cause of  lack  of  means,  may  otherwise  remain 
unimproved  and  useless,  or  pass  out  of  the  hands 
of  the  owners,  or  burden  the  owners  with  heavy 
and  uncomfortable  mortgages. 

Fifth,  taking  into  consideration  the  values  of 
the  benefits  which  have  been  already  mentioned, 
ground  leases  will  not  fail,  in  the  long  run,  to 
furnish  highly  satisfactory  pecuniary  returns  upon 
the  amounts  which  have  been  invested. 

The  nature  of  this  method  of  leasing  real  estate 
being  somewhat  exceptional,  because  of  the  fact 
that  errors  or  mistakes  which  may  be  made  cannot 
be  cured  in  short  times  by  the  expirations  of  the 
leases,  and  by  the  changing  of  tenants  and  con- 
ditions, but  must  continue,  with  all  the  difficulties 
which  they  may  provoke,  probably  during  the 
remaining  years  of  the  investors'  lives,  such 
transactions  should  be  conducted  with  extra- 
ordinary care,  investors  realizing  fully  the  fact, 
that,  if  satisfactorily  consummated,  the  results 
will  afford  ample  compensations  for  the  thought- 
ful care  which  shall  have  been  bestowed. 

Ground  leases  should  contain  covenants  against 
nuisances  which  may  be  to  the  effect  that  the 
tenants  wiU  not  erect,  maintain,  or  allow  to  be 
erected  or  maintained,  upon  the  demised  premises. 


282  The  American  Business  Woman 

any  slaughter-house,  brewery,  distillery,  stable, 
forge,  foundry,  factory,  or  any  other  house  or 
building,  used  or  intended  to  be  used  for  any 
noxious,  noisome,  dangerous,  or  offensive  trade 
or  business.  In  the  proper  cases,  they  should 
contain  clauses  providing  for  the  valuations  or 
appraisements  of  the  lands  and  improvements, 
for  the  purposes  of  fixing  the  rentals  for  the  terms 
of  renewals,  and  of  determining  the  prices  which 
must  be  paid  for  the  improvements  by  the  land- 
lords. Such  provisions  may  require  the  ap- 
pointment of  appraisers  of  a  certain  designated 
class,  such  as  freeholders  in  the  particular  neigh- 
borhoods; and,  in  case  of  failure  to  agree,  the 
appointment  by  the  appraisers  of  referees  whose 
decisions  shall  be  final  and  binding.  A  groimd 
lease  may  contain  a  clause  concerning  the  assign- 
ment of  the  lease,  which,  if  not  altogether  for- 
bidding assignment,  may  provide  that  in  case 
the  tenant  shall  desire  to  assign  the  whole  or  a 
part  of  his  interest  in  the  lease,  he  must  submit 
the  terms  of  the  proposed  assignment  to  the 
landlord,  and  give  him  the  option  of  assuming 
the  proposed  assignment;  or  the  covenant  may 
provide  that  the  tenant  shall  assign  his  interest 
only  to  such  parties  as  shall  be  satisfactory  to 
the  landlord.  The  covenant  by  which  the  tenant 
agrees,  at  all  times,  to  insure  the  buildings  against 
loss  by  fire,  for  the  benefit  of  and  in  the  name  of, 
the  landlord,  may  also  provide  that,  in  case  of  the 


Landlord  and  Tenant  283 

partial  or  complete  destruction  of  the  buildings, 
by  fire  or  otherwise,  the  tenant  shall  at  once 
rebuild  the  same  at  his  own  expense,  and  that 
any  insurance  which  may  be  collected  by  the 
landlord  shall  be  applied  towards  the  cost  of  the 
rebuilding.  Other  agreements  which  may  be 
included  in  ground  leases  are:  one  to  the  effect 
that  the  tenants  will  not  allow  the  premises  to 
become  dilapidated  or  in  any  way  out  of  repair, 
and  one  which  shall  specify  the  covenants  which 
must  be  contained  in  the  renewal  leases,  which 
agreement  must  make  provisions  for  any  differ- 
ences between  the  original  leases  and  the  renewal 
leases  which  may  be  due  to  changes  in  the  rents, 
the  final  purchasing  or  reverting  of  the  improve- 
ments, and  the  circumstances  attending  the  final 
expirations  of  the  terms. 

As  may  have  been  surmised  without  difficulty, 
from  the  preceding  statements  and  suggestions, 
the  advantages  of  ground  leases  are  not  to  be 
derived  indiscriminately  from  all  kinds  of  unim- 
proved real  estate.  In  order  to  be  available  for 
the  purposes  of  ground  leases  which  will  include 
the  benefits  and  advantages  which  have  been 
mentioned,  real  estate  must  possess  considerable 
present  values,  and,  at  least  in  the  judgments  of 
the  tenants,  greater  prospective  values. 

It  may  be  said  that  the  prospective  values,  or 
the  expected  future  values,  of  land  are  the  chief 
moving  causes  of  ground  leases,  the  theory  of  the 


284    The  American  Business  Woman 

tenants  being  that,  by  the  rapidly  advancing 
values,  plainly  foreseen  by  them  and  unlocked 
for  by  the  landlords,  they  will  obtain  the  rich 
rewards  which  surely  come  to  those  whose  fortu- 
nate visions  are  able  to  extend,  with  no  mistaken 
gaze,  into  the  seemingly  imcertain  events  of  the 
future. 

Occupation  of  Buildings. — The  uses  and 
purposes  to  which  improved  real  estate  shall 
be  put  by  the  occupying  tenants  are  evidently 
matters  of  great  importance  to  the  owners  of 
real  estate,  since  the  items  of  rents,  expenses, 
sinking  funds,  and  incomes,  in  addition  to  the 
element  of  the  actual  endurance  of  premises,  will 
vary  greatly  for  different  businesses  and  manners 
of  occupation.  With  regard  to  improved  real 
estate  which  shall  be  rented  exclusively  for  the 
purposes  of  residences  and  homes,  the  special 
efforts  of  the  owners  are  to  be  directed  towards  the 
obtaining  of  tenants  who,  independent  of  the 
conditions  which  go  to  secure  the  rentals,  shall 
be,  first,  in  all  respects  reputable,  and  second,  so 
circumstanced  that  such  elements  as  danger  of 
fire,  wear  and  tear,  and  other  injuries  to  property 
will  be  the  smallest  possible.  The  danger  that 
premises  will  be  used  for  purposes  of  the  most 
disreputable  kind  is  at  its  greatest  with  real  estate 
of  this  kind.  And  this  danger  is  to  be  carefully 
guarded  against,  because  for  certain  owners  of 


Landlord  and  Tenant  285 

real  estate,  the  probabilities  that  their  rentals 
have  been  earned  by  the  shame  and  disgrace  of 
their  fellow-beings,  and  that  their  properties  may 
be  the  media  of  such  conditions,  cannot  fail  to  be 
abominations;  and  also  because  the  law  very 
properly  makes  landlords,  to  certain  extents,  re- 
sponsible for  the  occupations  of  their  tenants, 
and  often  punishes  landlords  for  allowing  their 
premises  to  be  used  for  unlawful  purposes. 

The  precautions  which  are  to  be  taken  against 
such  occupations  are:  the  careful  and  intelligent 
examination  of  references;  the  exercising  of  sound 
judgment  and  discretion  with  regard  to  the  state- 
ments and  general  appearances  of  proposed 
tenants,  and  the  including  of  proper  restrictions 
in  the  leases;  or  the  insisting  upon  only  short- 
lived tenancies  (such  as  from  month  to  month)  in 
all  cases  where  there  shall  be  grounds  for  reason- 
able doubts. 

Concerning  real  estate  which  is  to  be  used  for 
the  many  purposes  of  trade  and  business,  it  must 
be  remarked  that  the  particular  uses  and  the 
effects  of  the  uses  upon  the  clear  returns  from 
the  investments  will  require  a  very  careful 
consideration. 

Special  attention  should  be  given  to  the  char- 
acters of  the  securities,  and  to  the  agreements 
which  shall  be  made  concerning  them;  that  the 
securities  may  be  ample  to  cover  all  possible 
difficulties  with  the  public  authorities,  growing 


286    The  American  Business  Woman 

out  of  the  legal  responsibilities  of  landlords  for 
the  misdeeds  of  their  tenants ;  and  that  the  agree- 
ments may  be  legally  sufficient  for  the  application 
of  the  seciuities  to  the  desired  purposes.  Espe- 
cially should  landlords  provide  for  their  protection 
against  the  effects  of  the  statutes  relating  to  the 
sale  of  intoxicating  liquors  called  the  "Civil 
Damage  Acts,"  which  in  some  of  the  States 
make  the  owners  of  real  estate  responsible 
for  certain  damages  resulting  from  the  acts  of 
those  who  'shall  become  intoxicated  upon  their 
premises. 

Many  branches  of  business  are  of  such  char- 
acters that  the  increased  danger  of  fire  which  is 
involved  will  be  evident  without  difficulty.  Thus, 
carpenter  shops  and  all  kinds  of  wood-working 
establishments,  factories  which  deal  largely  in 
explosive  or  combustible  materials,  and  stores 
for  the  selling  of  fireworks,  ammunition,  certain 
kinds  of  oils,  or  other  inflammable  goods,  will 
evidently  greatly  increase  the  rates  of  insurance 
upon  buildings  in  which  they  shall  be  located. 
Insurance  companies  classify  nearly  all  branches 
of  business  with  regard  to  the  risks  of  fire  which 
they  will  involve,  and  the  consequent  rates  of 
insurance  which  will  be  charged.  Owners  of 
real  estate  must,  therefore,  ascertain  the  effects 
upon  insurance  rates  of  the  uses  to  which  it  shall 
be  proposed  to  put  their  premises  before  de- 
termining upon  the  amounts  of  the  rents  which 


Landlord  and  Tenant  287 

shall  be  asked;  and,  for  this  purpose,  the  regular 
insurance  agents  who  are  employed  by  the  owners 
should  be  consulted  in  all  cases  where  there  shall 
be  doubts,  especially  in  all  cases  where,  because 
of  the  large  amounts  of  insurance  which  will  be 
affected  by  increased  rates,  the  increase  in  the 
cost  of  the  policies  will  be  considerable. 

The  differences  between  various  kinds  of  busi- 
ness, with  respect  to  wear  and  tear,  probable 
damage  from  other  causes,  cost  of  supplying 
heat,  light,  power,  etc.,  must  come  under  the 
careful  consideration  of  owners  of  real  estate. 
The  question  of  wear  and  tear,  and  other  in- 
juries to  buildings,  may  be  of  very  great  import- 
ance; for,  in  cases  where  buildings  from  such 
causes  as  weakness  or  lightness  of  construction 
shall  be  entirely  unfitted  for  heavy  and  racking 
businesses,  the  buildings  may  be  entirely  destroyed 
by  collapse;  and  the  owners,  in  addition  to  the 
loss  of  their  buildings,  may  thus  be  put  to  heavy 
costs  for  personal  and  other  injuries. 

Owners  of  buildings  should  know,  by  consulta- 
tion with  architects,  or  otherwise,  the  strains 
and  loads  for  which  their  buildings  have  been 
designed,  and  should  limit,  by  provisions  in  the 
leases,  all  tenants  to  businesses  which  will  be 
safe  in  this  important  respect. 

The  construction  of  buildings  in  such  manners 
that  they  shall  be  suitable  to  the  businesses  for 
which  they  are  to  be  used;  or,  inversely,  the  fitting 


288    The  American  Business  Woman 

of  the  uses  to  the  characters  of  the  buildings,  will 
to  a  great  extent,  remove  the  difficulties  of  ex- 
cessive wear  and  tear;  and  the  expenses  for  such 
items  as  heat,  light,  water,  etc.,  are  to  be  arranged 
for  by  corresponding  adjustments  of  the  rentals. 
In  all  cases  where  proposed  tenants  shall  be, 
during  the  negotiations,  engaged  in  the  same  kinds 
of  business  at  other  places,  landlords  may  be  able 
to  form  fairly  correct  estimates  of  the  expenses 
which  must  be  anticipated  from  the  renting  of 
their  premises  to  the  proposed  tenants  by  exami- 
nations of  the  premises  which  are  then  occupied 
by  the  proposed  tenants,  and  by  inquiries  of 
previous  landlords  and  agents.  By  such  means 
also  the  special  amounts  of  wear  and  tear,  which 
are  dependent  upon  the  particular  manners  in 
which  proposed  tenants  shall  conduct  their 
businesses,  may  be  approximated;  for  it  is  evident 
that  all  persons  who  shall  be  engaged  in  the  same 
kinds  of  business  will  not  manage  their  businesses 
in  the  same  manner  with  respect  to  the  effects 
upon  the  premises  which  they  occupy. 

Inquiry  may  also  be  made  into  the  details  of 
a  particular  business,  and  agreements  may  be 
made  with  the  tenants  concerning  the  manner  in 
which  the  business  shall  be  conducted,  with  a 
view  to  reducing  the  costs  of  repairs,  insurance, 
etc.  In  this  manner  businesses  may  sometimes 
be  made  satisfactory  to  the  insurance  companies, 
and  the  wear  and  tear  may  be  materially  les- 


Landlord  and  Tenant  289 

sened  by  the  regulation  of  comparatively  unim- 
portant details. 

Rent  Accounts. — The  consideration  of  the 
subject  of  landlord  and  tenant,  and  with  it  the 
long  discussion  of  the  subject  of  investments  in 
real  estate,  may  now  be  brought  to  a  conclusion 
by  the  addition  of  some  remarks  upon  the  proper 
and  most  convenient  methods  of  keeping  accoimt- 
books  of  rents  and  disbursements  upon  real 
estate,  which  may  be  conveniently  termed  "rent 
account-books." 

A  separate  account  of  the  rents  which  shall 
be  collected,  and  of  the  disbursements  which 
shall  be  made,  should  be  kept  for  each  building, 
house,  apartment,  store,  or  office  which  is  ordi- 
narily intended  to  be  occupied  by  a  single  tenant. 
Thus,  for  example,  in  a  building  which  contains 
twenty-five  separate  offices,  a  separate  account 
should  be  kept  for  each  office,  or  at  least  for  each 
portion  of  the  building  which  shall  be  leased  to 
a  single  tenant.  Such  an  arrangement  will  be 
most  advantageous  for  the  purpose  of  keeping 
the  details  of  each  investment  clearly  in  view, 
and  also  for  the  purpose  of  enabling  owners  to 
charge  all  disbursements  for  repairs,  etc.,  against 
the  exact  premises  to  which  they  belong. 

The  separate  rent  accounts  of  parts  of  a  build- 
ing may,  each  year,  or  quarter,  be  carried  into 
a   summary   for   the   entire   building,    and   such 


290  The  American  Business  Woman 

charges  as  taxes,  general  repairs  to  the  building, 
allowance  for  sinking  fund,  and  such  disburse- 
ments as  cannot  be  apportioned  among  the  sepa- 
rate parts  may  be  charged  in  the  summary  against 
the  entire  building.  The  general  benefits  of  such 
an  account  will  be  evident  without  further  men- 
tion; and  the  special  benefits  will  be  the  abilities 
of  the  owners,  at  all  times,  to  know  the  exact 
conditions  of  their  investments,  to  observe,  almost 
at  a  glance,  the  relative  renting  qualities  of  their 
properties,  and  to  determine  from  these  the 
methods  of  managing  their  present  and  future 
real  estate  investments. 

The  following  pages  will  illustrate  plainly  the 
suggested  method  of  keeping  the  rent  account- 
book.  The  pages  are  intended  to  represent  pages 
of  a  rent  account-book  of  an  office  building,  the 
cost  of  which  is  presumed  to  have  been  seventy- 
five  thousand  dollars  for  the  land,  and  the  same 
amount  for  the  building,  the  total  cost  of  the 
investment  being  one  hundred  and  fifty  thousand 
dollars. 

The  various  figures  have  been  taken  merely 
for  the  purpose  of  convenience,  and  must  not  be 
considered  as  guides  for  the  proper  amoimts  of 
rentals  and  expenditures  in  such  cases. 


Landlord  and  Tenant 


291 


OiEce  Building, 

No.  2000-2002  Narrow  St.,  New  York  City. 

Store  No.  2000,  James  Jones,  Tenant. 


Dr. 

Cr. 

1890. 

1890. 

Jan.     10, 

To  painting   anc 

[ 

Jan.       3. 

By  Jan.  rent  . 

$ 

300 

decorating.  .  . 

$ 

55 

Feb.       4. 

300 

30, 

To  commission. . 

9 

Mar.      s. 

"  Mar.     "     *. 

300 

Feb.     25. 

9 

April      2, 
May      9. 

"  April     "     . 
"  May     "     . 

300 

Mar.   30, 

" 

9 

300 

Ap'l     30, 

"           " 

9 

June      8, 
July       7. 

"  June     "     . 

300 

May      2. 

"  carpenter's  .  . 

300 

work 

s 

Aug.       5, 

"  Aug. 

300 

30. 

To  commission. 

9 

Sep.       9. 

"  Sep.      "     . 

300 

June    30, 
July     30, 

"            '* 

9 

Oct.       3. 

•'  Oct.      "     . 

300 

"           " 

9 

Nov.      2, 

"  Nov.    "     . 

300 

Aug.    30, 

"           " 

9 

Dec.      4. 

"  Dec.     "     . 

300 

Sep.     30, 

"           " 

9 

Oct.     30. 

"           " 

9 

Nov.   30, 

"           " 

9 

Dec.    30, 

"           " 

9 

By  balance 

$3 

432 

$3 
$3 

600 

$3 

600 

600 

Office  Building, 

No,  2000-2002  Narrow  St.,  New  York  City. 

Store  No.  2002,  Wm.  Black,  Tenant. 

Jno.  White  &  Co. 


Dr. 


Cr. 


1890. 

Jan. 

10, 

" 

30, 

Feb. 

25. 

Mar. 

15, 

" 

30, 

Ap'l 
May 

30, 
30, 

July 

30, 

Aug. 

30, 

Sep. 

30. 

Oct. 

30, 

Nov. 

30, 

Dec. 

30, 

To  painting  and 

decorating.  . 
To  commission 


plumbing... 
commission 

expense  of  dis 
possessing  Wm 

Black 

To  commission 


By  balance. 


10 
10 
10 
10 
10 
10 
10 
31S 

500 


1890. 


Feb.  5 

Mar.  8 

Ap'l  30 

July  I 

Aug.  2 

Sep.  3 

Oct.  3 

Nov.  2 

Dec.  3 


By  Jan.  rent. . 

"  Feb.      "     . 

"  Mar.     "     . 

"  April    "     . 

'•  July      "     . 

(White  &  Co.) 
By  Aug.  rent 

"  Sep.      "     . 

"  Oct.      "     . 

"  Nov.     "     . 

"  Dec.     "    . 


l3 


350 
3SO 
3SO 
350 
350 
350 
350 
350 
350 
350 
350 


500 


292  The  American  Business  Woman 


Office  Building, 
'  'No.  2000-2002  Narrow  St.,  New  York  City, 
Office  No.  I,  Clark  &  Co.,  Tenants. 


Dr. 

Cr 

• 

1890. 

189c 

. 

Jan.     10,  To  papering. , . 

$  30 

tl- 

2, 

By  Jan,  rent. . 

$  SO 

"        30,1    "  commission 

50 

Feb. 

4, 

"  Feb.      "     . 

SO 

Feb.     25,;    " 

50 

Mar. 

2, 

"  Mar.     "     . 

SO 

Mar.    10, 

"  gas  fixtures 

Ap'l 

2, 

"  April     "     . 
"  May     "     . 

SO 

30, 

"  commission 

SO 

May 

3, 

SO 

Ap'l     30, 
May    30, 

50 

June 
July 

2, 

"  June     "     . 

SO 

SO 

3, 

::  J.^iy  ::  • 

50 

June    30, 
July     30, 

SO 

Aug. 

I, 

Aug. 

SO 

50 

Sep. 

2, 

"  Sep.      "     . 

SO 

Aug.    30, 

SO 

Oct. 

3, 

"  Oct.      "     . 

SO 

Sep.     30, 

SO 

Nov. 

3, 

"  Nov.     "     . 

SO 

Oct.     30, 

SO 

Dec. 

2, 

"  Dec.     ••     . 

SO 

Nov.   30, 

SO 

Dec.    30, 

SO 

By  balance.... 

— 

549 

— 

$600 

$600 

For  the  sake  of  convenience,  we  may  assume 
that  the  supposed  office  building  shall  contain 
fifteen  offices,  and  that  the  annual  balance  in 
the  case  of  each  office,  determined  as  has  been 
shown  above,  shall  be  five  himdred  and  forty-nine 
dollars. 

The  annual  summary  for  the  entire  building, 
and  consequently  the  yearly  indication  of  the 
condition  of  the  investment,  may  now  be  made 
out  as  is  illustrated  on  the  following  page.  If 
such  shall  be  desired,  quarterly  instead  of  yearly 
stimmaries  may  be  made  in  a  similar  manner, 
but  since  the  year  is  the  only  division  of  time 
for  which  the  kinds  of  expenses  will  be  similar 
and  complete  (thus  taxes,  water  rates,  etc., 
are  paid  annually)  the  annual  summary  will  be 
fotmd  to  be  the  more  satisfactory. 


Landlord  and  Tenant 


293 


Dr. 


Office  Building, 
No.  2000-2002  Narrow  St.,  New  York  City. 
Summary  for  1890. 

Cr. 


1890. 
Jan.  30, 

Feb.  28, 

Mar.   4, 

Ap'l  30. 
May  10, 

June  30, 

July     S. 

\\      30. 

Aug.  20, 

!!      3.?' 

Sep.     I, 

5. 

10, 

!!    ^.?' 

Oct.     s. 

!!    ^?' 

Nov.  30, 


Dec.  30, 
".      31, 


To  janitor's  wages 

"  gas  bill 

"  janitor's  wages 

"  gas  bill 

"  miscellaneous 

expenses 

To  janitor's  wages 

gas  bill 

janitor's  wages 

gas  bill 

miscellaneous., 
janitor's  wages, 

gas  bill 

janitor's  wages 

gas  bill 

carpenter  work, 
janitor's  wages 

gas  bill 

water  tax 

janitor's  wages 

gas  bill 

painting  roof... 

coal 

mason  work 
janitor's  wages, 

gas  bill 

miscellaneous. . 
janitor's  wages 

gas  bill 

janitor's  wages, 

gas  bill 

taxes 

janitor's  wages 

gas  bill 

sinking  fund. . . 
6%  interest  on 
$150,000.  .... 
By  balance 


SO 
S 

SO 
5 

25 
SO 

S 
SO 

S 
25 
SO 

S 
SO 

S 
15 
SO 

S 

250 

SO 

5 

SO 

3S0 

25 

SO 

S 
IS 
SO 

S 
SO 

S 

850 

SO 

S 
000 

000 

717 


I14    982 


1890. 
Dec.  31 


By  store$2,ooo,bal 
"        2,002 
office   I, 

2, 

3, 

4, 

S. 

6. 

7. 

8, 

9. 
10, 
II. 
12, 
13, 
14. 
15. 


$    3 
3 


432 
31S 
549 
549 
S49 
S49 
S49 
549 
549 
S49 
S49 
549 
S49 
549 
549 
549 
S49 


$14  982 


The  result  of  the  stimmary,  in  the  case  of  the 
supposed  office  building,  will  be  a  discovery  of 
the  fact  that,  after  the  payment  of  all  expenses 
and  six  per  cent,  upon  the  amount  of  the  invest- 
ment, and  proper  allowance  for  the  sinking 
fund,  the  building  has  earned  a  balance  or  surplus 
of  over  seventeen  hundred  dollars. 


CHAPTER  X 

DESCENT  AND  DISTRIBUTION  OF  PROPERTY.      WILLS 

THERE  are  few  events  belonging  to  the  future 
which  generally  cause  greater  anxiety  and 
more  arduous  consideration  among  persons  of 
means  than  the  disposition  of  their  property 
after  their  deaths. 

It  is  because  of  the  great  importance  of  the 
subject  that  the  laws  of  all  civilized  lands  prescribe, 
with  such  great  care  and  exactness,  the  methods 
by  which  the  property  of  persons  who  shall  die 
without  making  wills  shall  be  divided  among 
their  surviving  relatives.  These  laws,  which  are 
called  the  laws  of  intestate  succession,  and  for  the 
distribution  of  the  estates  of  intestates,  differ 
considerably  in  the  different  States  of  our  country, 
with  regard  to  the  exact  provisions  which  are 
applicable  to  the  various  cases  which  may  arise; 
and,  except  for  the  making  of  the  statement  that 
the  real  and  personal  property  of  intestates  will 
generally  be  equally  divided  among  their  children 
(children  of  deceased  children  receiving  the  por- 

294 


Disposition  of  Property  by  Will    295 

tions  which  their  parents  would  have  taken  if  they 
had  been  Hving),  subject  to  the  widows*  dowers 
and  other  rights,  and  subject  to  certain  provisions 
for  surviving  husbands,  no  attempt  to  explain 
their  provisions  need  be  made  here. 

It  may  be  remarked,  however,  that  all  in- 
telligent persons  of  property  may  profitably,  by 
examinations  of  the  statutes  of  the  States  in 
which  they  live,  or  by  the  aid  of  lawyers,  make 
themselves  generally  familiar  with  the  laws  of 
their  own  States  governing  the  descent  of  real 
property  and  the  distribution  of  the  personal 
property  of  intestates.  And  it  may  also  be 
remarked  that,  if  persons  of  property  shall  not 
fail  to  take  the  precaution  of  having  their  wills 
made,  there  will  be  little  actual  need  of  studying 
the  laws  which  are  designed  for  those  who  shall 
meet  their  deaths  without  having  made  wills. 

Explanation  of  Terms. — A  person  who  dies 
without  leaving  a  valid  will  is  called  an  intestate. 
The  real  property  of  an  intestate  descends  directly 
to  the  heirs,  and  the  personal  property  of  an 
intestate  goes  to  the  administrator  or  adminis- 
tratrix who  is  appointed  by  the  court  for  the 
purpose  of  collecting  the  property  and  of  dis- 
tributing it,  according  to  the  provisions  of  the 
statutes,  to  the  next-of-kin. 

Strictly  speaking  a  will  is  a  disposition  of  real 
property,  to  take  effect  after  death,  and  a  testament 


296    The  American  Business  Woman 

is  a  similar  disposition  of  personal  property,  the 
term  "last  will  and  testament"  covering  the 
disposition  of  all  kinds  of  property  to  take  effect 
after  death.  The  popular  meaning  of  the  term 
''last  will"  is  the  legal  instrument  by  which  the 
property  of  a  deceased  person  is  given  to  others, 
according  to  the  wishes  of  the  deceased,  as  ex- 
pressed in  the  will,  the  term  being  thus  used  to 
express  both  the  strict  will  and  testament.  A 
codicil  is  a  clause  which  is  added  to  a  will,  after 
the  execution  of  the  will,  for  the  purpose  of 
changing  some  of  the  provisions  contained  in 
the  will. 

A  person  who  has  made  a  will  is  called  a  tes- 
tator or  (feminiae)  testatrix, 

A  gift  of  real  property  by  wiU  is  called  a  devise^ 
a  testator  who  makes  a  gift  of  real  property,  is  a 
devisor f  and  a  person  to  whom  such  a  gift  is  made 
is  a  devisee, 

A  bequest,  or  a  legacy^  is  a  gift  of  personal  property 
by  will,  the  latter  term  being  commonly  used  to 
denote  a  gift  of  money  or  of  specific  chattels;  a 
person  to  whom  a  bequest  or  a  legacy  is  given  is 
cafled  a  legatee, 

A  person  who  is  designated  in,  and  appointed 
by,  a  will  to  administer  the  estate  or  to  execute 
the  will,  of  a  testator  is  called  an  executor  or 
executrix, 

A  trustee  under  a  will,  or  a  testamentary  trustee, 
is  a  person  who  is  appointed  by  will  to  hold  some 


Disposition  of  Property  by  Will    297 

estate  or    interest    in  property  for  the  benefit 
of  another. 

A  testamentary  guardian^  or  a  guardian  by  will 
is  a  person  who  is  appointed  by  will  to  be  the 
guardian  of  the  person  or  estate  of  an  infant. 

'  Reasons  for  Making  Wills. — ^The  laws  of 
intestate  succession,  being  general  in  their  opera- 
tion, those  of  any  particular  State  making  in  all 
respects  similar  provisions  for  similar  conditions 
of  heirs,  next-of-kin,  and  estates,  and  possessing 
minuteness  of  detail  to  a  greater  or  less  degree 
only  in  order  that  no  such  condition  shall  be  left 
without  ample  statutory  provision,  it  may  fairly 
be  presumed  that  the  purpose  of  the  laws  is  not 
the  providing  of  perfect  standards  for  the  descent 
and  distribution  of  the  property  of  intelligent  and 
provident  persons  of  means,  but  the  furnishing 
of  a  convenient  means  for  the  disposition  of 
the  property  of  such  persons  as  may  come  to  their 
deaths  without  having  made  use  of  the  better  and 
more  comprehensive  method  of  the  last  will  and 
testament.  Indeed,  it  may  be  said,  more  tersely, 
that  these  laws  exist  only  for  the  benefit  of  the 
descendants  of  those  who  shall  neglect  the  making 
of  wills  until  it  is  too  late.  And,  further,  it  may 
be  said  that  the  very  existence  of  these  laws 
of  intestate  succession  furnishes,  to  a  certain 
extent,  an  affirmative  answer  to  the  question  as 
to  whether  owners  of  property  ought  to  leave 


298     The  American  Business  Woman 

behind  them,  at  their  deaths,  last  wills  and 
testaments. 

A  reason  for  the  making  of  wills,  the  great 
importance  of  which  must  go  without  saying,  is 
that,  only  by  means  of  wills  can  satisfactory  and 
trusted  persons  be  selected  by  the  owners  of 
property  for  the  management  of  their  estates 
after  their  deaths.  The  fact  that  the  laws  gener- 
ally provide  an  order  in  which  the  relatives  of  an 
intestate  shall  be  entitled  to  the  administration 
of  the  estate,  will  in  no  measure  detract  from  the 
force  of  the  reason;  for  such  are  the  possibilities 
of  events  which  will  change  the  prescribed  order 
that  its  expected  operation  will  often  be  set  at 
naught. 

Another  important  reason  for  the  advantage 
of  the  making  of  wills  is  the  fact  that  the  legal 
requirements  with  relation  to  the  bonds  which 
must  be  furnished  by  administrators  may  prove 
to  be  the  source  of  great  trouble  and  inconvenience 
to  the  relatives  of  deceased  persons  who  have  made 
no  wills. 

A  satisfactory  reason  why  married  women  who 
shall  be  possessed  of  real  estate,  and  to  whom 
children  have  been  bom,  should  not  fail  to  have 
their  wills  made,  is  that,  under  the  laws  relating 
to  estates  by  courtesy,  the  husbands  of  intestd-te 
wives  who  have  given  birth  to  living  children 
will  be  entitled  to  life  estates  in  all  the  real  prop- 
erty of  which  their  wives  may   die  possessed. 


Disposition  of  Property  by  Will   299 

While  there  are  many  cases  in  which  such  dis- 
positions of  real  estate  may  not  be  at  all  objec- 
tionable, there  are  also  many  cases  in  which  the 
results  of  such  dispositions  will  be  far  from  satis- 
factory; and,  in  the  latter,  which  probably  make 
up  the  majority  of  cases,  the  only  adequate  remedy 
will  be  the  making  of  properly  drawn  last  wills. 

Conditions  for  the  Success  of  Wills. — A 

consideration  of  the  entire  subject  of  wills  which 
will  prove  to  be  sufficient  for  the  purposes  of 
this  volume  may  be  conveniently  attained  by  the 
investigation  of  three  conditions  which  may  be 
regarded  as  essential  to  the  successful  operations 
of  wills.  These  three  conditions  are:  first,  that 
the  provisions  which  are  contained  in  wills  shall 
be,  in  all  respects,  sufficient  for  the  purposes  of 
the  testators;  second,  that  wills  shall  be  legally 
valid;  and  third,  that  the  provisions  of  wills  shall 
be  fully  and  faithfully  carried  into  effect. 

For  the  fulfilment  of  the  first  condition,  a 
careful  selection  of  lawyers  for  the  drawing  of 
wills,  and  consultations  with  the  lawyers  which 
shall  be  sufficient  to  enable  them  to  understand 
fully  the  wishes  and  purposes  of  their  clients, 
should  furnish  the  general  rule  of  conduct. 

The  preparation  of  a  complete  list  of  pro- 
posed bequests,  devises,  and  provisions,  containing 
the  names  and  other  descriptions  of  all  bene- 
ficiaries, executors,  trustees,  and  guardians,  and 


300  The  American  Business  Woman 

memoranda  of  all  questions  upon  which  particular 
advice  may  be  desired,  will  greatly  facilitate  the 
business  of  making  wills.  Such  a  list  should  be 
clear  and  concise,  and  written  in  ordinary  style, 
without  attempts  to  use  technical  terms,  leaving 
for  the  lawyers  the  determination  of  necessary 
formal  and  legal  terms.  The  following  example 
of  memoranda  will  serve  to  illustrate  this  sug- 
gestion : 

Memoranda  for  Will  of  Mary  Jane  Doe,  wife  of 
John  Doe,  of  Boston,  Mass.: 

1.  To  Mary  Blake,  my  old  servant,  one  thou- 
sand dollars,  as  soon  as  possible  after  my  death. 

2.  To  my  husband,  John  Doe,  my  residence, 

No.   ,   St.,    Boston,    Mass.,    with   all 

furniture,  books,  pictvires,  works  of  art,  and  house- 
hold goods,  for  his  life,  afterwards  to  my  children 
then  living,  and  to  the  heirs  of  any  deceased 
children. 

3.  To  my  sister,  Alice  Roe,  wife  of  Richard 
Roe,  of  New  York  City,  ten  thousand  dollars. 

4.  To  my  son,  Thomas,  the  income  from 
twenty-five  thousand  dollars  for  life,  afterward 
the  twenty-five  thousand  dollars  to  go  to  his 
children,  if  any;  otherwise  to  my  surviving  chil- 
dren, and  the  heirs  of  any  who  may  be  deceased. 

5.  To  my  husband,  John  Doe,  one  third  of 
all  the  rest  of  my  property,  for  lif e ;  afterward 
to  be  equally  divided  among  my  three  children 


Disposition  of  Property  by  Will  301 

Sarah  D.  Wright,  wife  of  William  Wright,  of 
Boston,  Mass.,  Edward  H.  Doe,  and  Charies  T. 
Doe,  and  the  children  of  my  deceased  daughter, 
Fannie  Carlton,  late  wife  of  Peter  Carlton,  of 
Philadelphia,  Pa.,  the  children  of  Fannie  taking 
the  share  which  would  have  been  their  mother's. 

6.  All  the  rest  of  my  property  to  my  three 
children,  Sarah  D.  Wright,  Edward  H.  Doe,  and 
Charles  T.  Doe,  and  to  the  children  of  my  de- 
ceased daughter  Fannie  Carlton,  equally,  the 
grandchildren  having  the  share  which  would 
have  been  their  mother's. 

7.  If  any  of  my  three  children,  Sarah,  Edward, 
and  Charles  shall  die  before  my  death,  I  wish 
the  property  which  would  have  gone  to  them 
if  living  to  be  given  to  their  children;  and,  if  they 
shall  have  no  children,  to  the  siirvivors  of  my 
three  children  mentioned;  and  to  the  children  of 
my  deceased  daughter,  Fannie,  the  share  which 
she  would  have  had  if  living. 

8.  My  husband,  and  my  three  children,  Sarah, 
Edward,  and  Charles,  or  the  survivors  to  be  my 
executors  and  trustees. 

Numerous  as  they  may  appear  to  be,  it  is 
believed  that  all  of  the  proper  motives  and  pur- 
poses for  the  making  of  wills  may  be  included 
in  three  general  objects,  to  wit:  the  protecting 
against  want  and  suffering  of  those  who  have  either 
natural  or  proper  claims  to  such  protection;  the 
providing  for  the  improvement  of,  or  at  least  for 


302    The  American  Business  Woman 

the  continuance  of,  the  present  status  of  families; 
and  the  doing  of  charity  and  good  works. 

The  distinguishing  of  those  who  have  natural 
claims  to  one's  protection  is  in  general  a  matter  of 
no  great  difficulty.  Natural  affection  will  quickly 
and  invariably  suggest  children  and  children's 
children,  husbands  and  wives,  parents,  brothers, 
and  sisters;  and  if,  by  reason  of  improper  conduct, 
any  of  these  shall  seem  to  have  forfeited  their 
natiu-al  claims,  the  painful  question  must  finally 
be  answered  only  by  long  and  conscientious  re- 
flection, entirely  free  from  improper  prejudice 
and  uncharitableness. 

These  elements  of  the  problem  having  been 
satisfactorily  determined,  owners  of  property 
may  next  consider  some  of  the  common  mistakes 
of  judgment  which  they  will  assuredly  be  anxious 
to  avoid  in  the  making  of  wills. 

A  mistake  which  is  sometimes  made  in  the 
disposition  of  property  by  will,  and  which  may 
result  in  disappointment  and  hardship  to  sur- 
viving husbands  and  wives,  is  the  failure  properly 
to  realize  the  effects  of  the  dividing  of  estates 
among  the  various  members  of  families.  It  may 
be  that,  in  this  manner,  a  husband  will  deprive 
his  widow  of  the  means  of  maintaining  the  old 
home  which  has  long  since  become  immeasurably 
dear  to  her ;  or  that  a  wife,  by  neglecting  to  calcu- 
late the  necessary  expenses  of  maintaining  her 
residence  during  her  life,  may  bring  disappoint- 


Disposition  of  Property  by  Will   3^3 

merit  and  humiliation  upon  him  who,  during  her 
long  life,  was  in  all  respects  a  faithful  and  a  loving 
husband. 

On  the  other  hand,  the  practice  of  leaving  all 
one's  property  to  the  surviving  husband  or  wife 
for  life,  afterward  to  go  to  the  children,  is  re- 
garded by  many  as  being  unjust  to  the  children 
because  it .  may  keep  too  long  from  them  their 
birthrights,  and  also  because  it  may,  in  certain 
cases,  reflect  upon  their  abilities  to  manage 
their  affairs  independently. 

In  cases  where  there  shall  be  ample  means  for 
the  proper  support  of  all  members  of  the  families, 
the  most  satisfactory  general  course  seems  to 
be  the  giving  to  surviving  husbands  or  wives  of 
property  which  shall  be  sufficient  to  insure  the 
continuance  of  their  accustomed  styles  of  living 
during  the  remainders  of  their  lives,  the  property 
afterward  to  be  divided  among  the  children,  and 
the  dividing  of  the  remaining  property  equally 
among  the  children. 

In  cases  where  estates  shall  not  be  so  ample 
the  better  part  certainly  appears  to  be,  first  of 
all,  the  protection  of  husbands  and  wives  during 
their  lives,  leaving  to  the  younger  and  stronger 
ones  the  necessity,  if  need  be,  of  battling  for  their 
livings.  And  the  theory  upon  which  such  a 
conclusion  is  based  is  evidently  the  duty  and 
propriety  of  protecting  first  those  who  are  least 
able  to  protect  themselves.     This  theory  should 


304    The  American  Business  Woman 

find  an  equal  application  to  all  those  who  shall 
have  natural  claims  to  protection,  and  who  may, 
from  sickness,  or  from  other  legitimate  causes,  be 
placed  in  the  category  of  helpless  ones.  And, 
with  the  same  theory  in  view,  the  end  may  be  best 
attained  by  such  dispositions  of  property  by 
will  as  shall  give  to  those  who  are  least  competent, 
kinds  of  property,  or  property  placed  in  invest- 
ments, which  will  be  the  least  difficult  to  manage 
and  to  retain.  Thus,  a  son  who  is  a  capable  and 
reliable  business  man  may  receive  bequests  of 
money  in  cash;  an  artless  daughter  who  is  without 
experience  in  the  management  of  property,  the 
income  from  an  investment  which  is  assured  for 
many  years  to  come;  and  a  spendthrift,  or  im- 
provident child,  may  be  provided  only  with  a 
stated  and  limited  income  for  life. 

The  providing  for  the  future  improvement  of, 
or  at  least  for  the  continuance  of,  the  status  of 
families,  may  justly  be  considered  a  desirable  and 
most  commendable  object.  For  the  status  of  a 
family  must  signify  the  conditions  of  all  its 
members,  with  regard  to  the  true  accomplish- 
ments and  useful  attainments,  which,  it  is  true, 
may  not  be,  but  which  ought  to  be,  the  direct 
results  of  independent  means. 

The  effect  of  the  division  of  the  parents*  prop- 
erty among  several  children  upon  the  future 
status  of  the  family,  unless  counteracted  by  other 
influences,   must   inevitably  tend  in  the  wrong 


Disposition  of  Property  by  Will   305 

direction — that  is,  to  lower  the  status  of  the 
family.  And  in  this  fact  lies  the  pith  of  the 
difficulty,  which  may  be  clearly  brought  out  by 
an  assumed  case,  involving  only  ordinary  elements : 
If  the  competence  of  parents,  equal  to  half 
a  million  of  dollars,  at  the  death  of  the  parents 
shall  be  divided  equally  among  five  children, 
the  competence  of  each  child,  unaided  from  other 
sources,  will  be  reduced  to  the  amount  of  one 
hundred  thousand  dollars;  or,  since  each  child 
must  be  presumed  ultimately  to  be  the  parent 
of  a  distinct  branch  of  the  family,  the  status  of 
the  entire  family  will  be  reduced  to  one  fifth  of 
its  original  condition.  Such  a  result  is  to  be 
avoided  altogether  only  by  the  augmenting  of 
fortunes  in  equal  ratios  with  the  increasing  of 
family  numbers,  either  by  the  profits  and  accumu- 
lations from  industry  or  from  investment,  or  by 
the  wise  and  judicious  guidance  of  children,  in 
the  selection  of  husbands  and  wives,  who  shall 
possess  corresponding  fortiines. 

Entail. — From  the  theory  that  the  status  of 
the  family  may  best  be  maintained  by  a  concen- 
tration of  the  family  property  continually  upon 
one  branch  of  the  family,  and  by  forever  pre- 
venting the  alienation  of  the  property,  have  grown 
the  English  laws  of  primogeniture  and  entail; 
by  which  the  wealth  of  the  father  is  intended  to 
pass  down  the  generations  always  to  a  single  heir 


3o6    The  American  Business  Woman 

— if  possible,  to  the  eldest  son.  And,  from  a 
contrary  theory — that  the  unfairness  of  main- 
taining the  wealth  of  one  branch  of  the  family, 
at  the  expense  of  the  others,  is  opposed  to  the 
spirit  of  American  institutions — have  grown  the 
American  laws  in  actual  prohibition  of  the  English 
methods. 

These  laws,  called  the  laws  against  perpetuity, 
exist  generally  throughout  the  United  States, 
and  are  to  the  effect  that  the  power  of  alienation 
of  property  shall  not  be  suspended  for  a  longer 
period  of  time  than  during  any  number  (or  a 
certain  number)  of  lives  in  being.  In  some  States 
this  period  is  limited  to  two  lives  in  being,  and 
twenty-one  years  and  a  fraction  thereafter.  The 
practical  result  of  the  laws  against  perpetuities 
in  such  cases  is  that  the  alienation  of  property 
may  be  prevented  for  the  longest  possible  period 
of  time  by  giving  it  to  a  child  for  life,  afterward 
to  a  grandchild  for  life,  and  afterward  to  a  great 
grandchild  absolutely. 

Perhaps,  with  the  view  of  keeping  intact  large 
and  valuable  estates,  there  is  no  impropriety 
in  leaving  the  greater  part  of  an  estate  to  the  son 
or  daughter  who,  by  reason  of  substantial  char- 
acter and  ability,  shall  be  most  competent  to 
preserve  the  estate,  provided  other  deserving 
children  shall  not  be  left  without  proper  pro- 
tection. Indeed,  there  appears  to  be  a  tendency 
among  certain  families  of  great  wealth  to  adopt 


Disposition  of  Property  by  Will    307 

such  a  plan.  It  has  also  been  suggested  that, 
by  providing  for  the  longest  lawful  suspension 
of  the  power  of  alienation,  and  by  solemn  re- 
quests and  understandings  that  the  proceeding 
shall  be  continued  from  generation  to  generation, 
the  nearest  possible  approach  to  the  system  of 
entail  may  be  attained. 

Charitable  Bequests. — It  is  to  be  appre- 
hended that  all  properly  minded  persons  whom 
Providence  shall  have  blessed  with  ample  com- 
petences will,  during  their  lifetimes,  devote  certain 
portions  of  their  incomes  to  the  benefit  and  relief 
of  their  fellow-beings  who  shall  not  have  been 
similarly  blessed;  that  is,  to  the  doing  of  charity 
and  of  good  works.  And  no  less  is  it  to  be  appre- 
hended that  upright  and  generous  possessors  of 
fortunes  will  often  desire  to  make  provisions  for 
the  continuance  of  their  useful  and  generous  acts 
after  they  shall  have  been  called  away  from  life 
in  this  world. 

Property  may  be  given  by  will  to  charitable 
objects  in  three  general  manners.  First,  it  may 
be  given  directly  to  the  desired  objects;  second, 
it  may  be  given  to  executors  or  to  other  persons, 
with  more  or  less  specific  directions  as  to  how 
it  shall  be  distributed;  and  third,  it  may  be  given 
to  executors  or  to  others  with  directions  that  it 
shall  be  devoted  to  charitable  purposes,  but  at  the 
discretion   and  according   to   the  wishes  of  the 


3o8    The  American  Business  Woman 

persons  who  shall  be  so  designated.  With  regard 
to  these  methods,  it  may  be  said,  in  favor  of  the 
first,  that  it  is  the  simplest,  and  perhaps  the  least 
likely  to  miscarry;  in  favor  of  the  third,  that 
(presuming  the  persons  who  shall  be  selected 
for  the  trusts  to  be  in  all  respects  suitable)  it 
permits  of  the  employment  of  good  judgment  and 
discretion,  with  regard  to  individual  acts  of 
charity,  long  after  the  deaths  of  the  testators,  thus 
avoiding,  to  a  certain  extent,  the  giving  of  aid  to 
objects  which  may  be  at  one  time  deserving  and 
at  another  time  the  reverse;  and  in  favor  of  the 
second,  that  it  is  a  mean  between  the  other  two. 
Evidently  an  objection  to  the  first  method  will 
be  that  the  particular  objects  of  charity  may, 
after  having  received  their  bequests,  become,  by 
fraud  or  mismanagement,  unworthy;  and  a  com- 
mon objection  to  the  other  methods  will  be  the 
difficulties  in  the  way  of  selecting  persons  who 
may  be  thoroughly  relied  upon  for  the  faithful 
and  judicious  performance  of  their  trusts. 

Validity  of  Wills. — ^The  importance  of  taking 
all  possible  precautions  for  the  validity  of  wills 
need  scarcely  be  mentioned,  since  it  is  evident 
that  a  will  which  is  not  valid  is,  in  fact,  no  will 
at  all;  and  that  a  person  who  shall  have  no  will 
which  is  valid  will  be  an  intestate. 

The  first  requisite  for  the  validity  of  wills  is 
that  the  testamentary  capacities  of  testators  shall 


Disposition  of  Property  by  Will    309 

be  sufficient;  or,  in  other  words,  that  the  ages 
and  conditions  of  testators  with  respect  to  sanity, 
and  freedom  from  duress,  fraud,  and  undue  in- 
fluence shall  be  such  that  the  law  considers  them 
as  competent  to  dispose  of  their  properties  by  will. 

The  age  at  which  persons  may  make  valid 
wills  of  personal  property  is  not  the  same  in  all 
the  States;  some  States  requiring  that  testators 
shall  be  of  full  age,  while  others  fix  the  legal  age 
at  eighteen  (and  in  some  cases  even  fewer)  years; 
but  the  common  rule  with  regard  to  wills  of  real 
property  is  that  testators  must  be  of  full  age. 

The  general  rule  with  regard  to  mental  ca- 
pacity is  that  testators  must  have,  at  the  times 
of  maMng  their  wills,  understandings  of  their 
business  affairs,  and  recollections  of  the  properties 
of  which  they  wish  to  dispose,  of  the  persons  to 
whom  they  wish  to  leave  their  properties,  and 
of  the  manners  in  which  their  properties  are  to 
be  distributed.  These  requirements,  as  well  as 
the  requirements  with  regard  to  freedom  from 
duress,  fraud,  and  imdue  influence,  are  to  be 
best  provided  for  by  the  selection  of,  and  the 
free  consultation  with,  lawyers  who  shall  not 
only  be  competent  for  the  ordinary  purposes  of 
drawing  wills,  but  whose  experience,  judgment, 
and  carefulness  may  be  relied  upon  as  sufficient 
for  unusual  cases. 

There  are  also  other  statutory  provisions, 
differing  in  the  different  States,  with  regard  to 


310    The  American  Business  Woman 

the  execution,  witnessing,  and  attestation  of  wills, 
disinheriting  of  children,  provisions  for  husbands 
and  wives,  the  rights  of  married  women,  taxes 
on  certain  kinds  of  bequests  and  devises  to  cor- 
porations, etc. — all  of  which  must  necessarily 
be  looked  after  by  the  lawyers,  and  which  need 
not  receive  particular  mention  here. 

The  following  suggestions,  concerning  pre- 
cautions, which  are  not  included  in  the  legal  and 
technical  matters  relating  to  wills,  and  which, 
if  properly  followed,  will  go  far  towards  estab- 
lishing the  validity  of  wills,  will  prove  to  be  of 
benefit  to  owners  of  property : 

Unusual,  strange,  or  unnatural  provisions  in 
wills  will  often  excite  suspicions  concerning  the 
mental  capacities  of  testators,  and  may  also 
suggest  fraud  or  undue  influence  to  the  courts 
and  juries  upon  which  determinations  of  the 
validity  of  wills  may  finally  depend.  Testators 
may,  therefore,  wisely  abstain  from  making  such 
provisions  whenever  possible;  and,  if  they  cannot 
well  be  avoided,  explanations  and  reasons  may 
be  included  in  wills  for  the  purpose  of  preventing 
the  injurious  suspicions  and  suggestions  which 
have  been  mentioned.  With  the  same  purpose 
in  view,  the  reasons  for  all  unusual  provisions 
in  wills  may  be  thoroughly  explained  verbally 
to  the  lawyers  who  shall  draw  the  wills,  to  the 
subscribing  witnesses  who  must  prove  them,  and 
to  the  persons  who  shall  be  named  as  executors. 


Disposition  of  Property  by  Will   311 

It  may  also  be  said  that  testators,  instead  of 
delaying  the  making  of  their  wills  until  they  shall 
be  confined  to  their  beds,  perhaps  with  their  last 
illnesses,  should  take  care  that  their  wills  shall 
be  made  while  they  are  in  good  actual  and  ap- 
parent health.  Deathbed  wills  often  appear  to 
be  suggestive  of  undue  influence  or  of  mental 
incapacities,  from  the  mere  fact  that  the  mak- 
ing of  the  wills  shall  have  been  so  carelessly 
delayed. 

Preferably,  the  subscribing  witnesses  of  wills 
should  be  trusted  friends  of  intelligence  and  po- 
sition, who  shall  have  no  interests  in  the  wills 
further  than  that  the  wishes  of  the  testators  shall 
be  carried  out,  and  whose  long  or  intimate  ac- 
quaintances with  the  testators  will  afford  them 
excellent  opportunities  for  judging  correctly  the 
testamentary  capacitites  of  the  testators,  and 
the  conditions  under  which  the  wills  are  made. 
So,  if  the  lawyers  who  draw  wills  shall  be  well 
acquainted  with  the  general  conditions  and 
personal  characters  of  their  clients,  they  may 
prove  to  be  of  the  greatest  value  in  establishing 
the  validity  of  wills. 

The  lawyers  who  draw  last  wills  frequently 
act  also  as  subscribing  witnesses;  and  to  this 
arrangement  there  is  perhaps  no  objection,  pro- 
vided the  characters  of  the  lawyers  and  their 
acquaintance  with  the  testators  shall  be  satis- 
factory; nor  is   there   any   apparent   advantage 


312    The  American  Business  Woman 

in  the  arrangement,  unless  it  be  that  the  edu- 
cation and  training  of  lawyers  tend  to  make  them 
especially  suitable  for  such  purposes. 

With  the  view  of  aiding  the  establishment  of 
their  freedom  from  restraint  and  undue  influences, 
persons  wishing  to  have  their  wills  made  may  go 
alone  to  the  offices  of  their  lawyers,  and  may  have 
no  third  parties  present  at  their  interviews  until 
it  shall  be  necessary  to  furnish  witnesses  for  the 
attestation  of  the  wills. 

The  judicious  selection  of  executors  will  also 
tend  materially  to  aid  the  establishment  of  the 
validity  of  wills;  for,  upon  their  fidelity,  courage 
and  good  judgment,  may  depend  the  unopposed 
probating  of  wills,  and  the  successful  and  other- 
wise satisfactory  termination  of  litigations  con- 
cerning the  validity  of  wills. 

Perhaps  there  is  no  one  proceeding  in  connec- 
tion with  the  disposal  of  property,  which  is  so 
peculiarly  exposed  to  litigation,  as  the  proving 
of  wills;  and  it  is  doubtful  if  any  other  kind  of 
litigation  will  be  able  to  result  so  disastrously  to 
the  properties  which  are  involved.  Indeed,  the 
circumstances  which  are  peculiar  to  the  proving 
of  wills  which  seek  to  dispose  of  considerable 
properties  seem  to  invite  attacks  upon  the  wills 
by  all  persons  who  may  think  themselves  to  have 
been  tmfairly  treated  by  the  provisions  of  the 
wills,  and  by  all  unscrupulous  persons  who  may 
perceive  opporttmities  to  share  in  the  distribu- 


Disposition  of  Property  by  Will   313 

tions  of  the  estates.  Those  who  have  been  able 
to  accumulate  and  to  protect  the  properties  for 
the  disposal  of  which  the  wills  are  sought  to  be 
proved,  are  no  longer  to  be  feared;  helpless  and 
inexperienced  hands  may  have  the  management 
of  the  estates;  unworthy  lawyers  may  be  quick 
to  suggest  the  easy  overthrowing  of  the  wills; 
executors  may  be  incompetent  and  indifferent; 
courts  of  justice,  although  sternly  enjoined  by 
the  spirit  of  the  law  to  enforce  the  lawful  purposes 
of  wills,  appear,  in  many  cases,  to  be  none  too 
jealous  of  these  rights  of  the  dead,  and  likewise 
often  far  too  lavish  in  their  allowances  out  of 
the  estates;  and  all  the  allurements  of  rich  prop- 
erties, apparently  without  owners  and  without 
defenders,  seem  to  beckon  from  far  and  near  the 
cowardly  and  the  unscrupulous,  whose  assaults 
are  directed  only  against  the  helpless  and  against 
the  dead. 

In  view  of  these  facts,  not  only  the  precautions 
which  have  been  suggested  for  the  final  triumphs  of 
wills,  and  the  establishment  of  validity  in  spite 
of  all  opposition,  must  be  taken,  but  every  reason- 
able and  available  precaution  must  be  made  use 
of  for  the  entire  prevention  of  contest  or  litigation 
over  the  probating  of  wills.  And  with  this  object 
constantly  before  them,  wise  persons,  when  having 
their  wills  made,  will  hesitate  long  before  making 
extreme  provisions  which  will  be  almost  certain 
to  create  disappointment  and  contention. 


314    The  American  Business  Woman 

Executors  and  Guardians. — ^^The  final  con- 
dition concerning  last  wills  which  remains  to 
be  considered,  is  that  the  provisions  which  are 
contained  in  wills  shall  be  fully  and  faithfully 
carried  into  effect;  and  this  condition,  evidently, 
is  to  be  fulfilled  only  by  the  proper  selection  of  the 
persons  who  are  to  act  under  the  wills  as  executors, 
trustees,  and  guardians.  The  authority  of  these 
agents  in  the  management  and  disposition  of 
property,  and  their  opportunities,  either  faith- 
fully and  exactly  to  follow  out,  or,  to  a  great  extent, 
to  defeat,  the  wishes  of  their  departed  friends, 
may  not  safely  be  disregarded;  for,  although  the 
law  undertakes  to  hold  them  firmly  to  their  solemn 
duties,  its  vigilance  is,  indeed,  not  always  equal 
to  the  task. 

The  law  reposes  in  executors,  trustees,  and 
guardians,  somewhat  of  the  confidence  which,  it 
is  to  be  presumed,  was  intended  by  the  decedents 
by  whom  they  have  been  selected  and  appointed 
to  their  peculiar  duties;  They  usually  serve 
without  other  security  than  their  own  characters 
and  responsibilities,  subject  to  judicial  examina- 
tions, which  are,  in  the  majority  of  cases,  some- 
what perfunctory  and  superficial;  they  keep  their 
own  accounts  of  receipts  and  disbursements;  and 
in  many  ways  are  often  allowed  to  exercise  dis- 
cretions with  which  none  are  able  to  interfere. 
The  surpassing  importance  of  the  proper  selection 
of   executors,    trustees,    and   guardians   cannot, 


Disposition  of  Property  by  Will    315 

therefore,  be  doubted,  and  the  various  means  by 
which  this  object  may  be  best  accomplished  may 
well  receive  the  closest  consideration. 

Since  the  general  purpose  for  which  the  three 
testamentary  officers  which  have  been  mentioned 
are  appointed  is  the  same — to  wit,  the  carrying 
into  effect  of  the  wishes  of  the  deceased  persons — 
the  principles  upon  which  their  selection  should 
depend  may  be  considered  together,  after  first 
having  pointed  out  the  special  points  of  difference 
and  the  special  precautions  which,  accordingly, 
will  be  necessary. 

The  duties  of  a  simple  executor  include, 
briefly,  the  collection  of  the  assets  belonging  to  the 
estate,  the  payment  of  the  lawful  debts  of  the  de- 
cedent, the  payment  of  the  bequests  which  are  pro- 
vided for  in  the  will,  and  the  final  accounting 
before  the  proper  judicial  officers.  These  duties 
cease  with  the  final  accounting  and  discharge  of  an 
executor,  and  may  extend  over  only  short  periods 
of  time.  But  trustees  and  guardians  have  larger 
duties  to  perform — duties  which  may  extend 
through  periods  of  many  years,  or  even  dtu-ing 
entire  lifetimes.  Greater  care  ought,  therefore, 
be  given  to  the  choice  of  these  latter  officers,  in 
proportion  as  their  duties  and  responsibilities 
shall  be  of  greater  importance  and  of  longer 
durations. 

Evidently,  in  the  greater  number  of  cases,  the 
proper  and   most   natural  guardian   of   children 


3i6    The  American  Business  Woman 

will  be  the  surviving  parent  where  such  exists; 
and  if  there  shall  be  no  living  parent,  the  order 
of  desirability,  other  things  being  equal,  appears 
to  be:  grandparents,  elder  brothers  and  sisters, 
uncles  and  aunts  of  the  blood,  etc.;  the  nearest 
relative  who  shall  possess  the  necessary  qualities. 

If  it  shall  be  necessary  to  look  outside  of  the 
list  of  relatives  for  the  guardians  of  children,  a 
useful  rule  appears  to  be  that  the  required  char- 
acteristics are  most  likely  to  be  found  among 
middle-aged  persons  of  means  who  have  been 
deprived  of  their  own  children. 

The  law,  recognizing  the  fact  that  the  qualities 
which  are  required  for  the  management  of  prop- 
erty and  for  the  training  of  children  may  be 
widely  different,  often  allows  the  appointment 
of  two  guardians  for  the  same  child — the  one  a 
guardian  of  the  estate,  and  the  other  a  guardian 
of  the  person.  In  some  cases,  such  an  arrange- 
ment wiU  prove  to  be  the  more  satisfactory;  but 
the  better  general  rule  seems  to  be  to  approximate, 
as  closely  as  possible,  to  the  relation  of  actual 
parent  and  child,  by  uniting  in  the  same  person 
all  the  duties  and  responsibilities  of  guardian. 

The  laws  of  the  different  States,  in  relation  to 
the  appointment  of  testamentary  guardians,  are 
not  in  all  respects  uniform;  a  common  rule,  how- 
ever, is  that  the  appointment  belongs  to  the 
father,  and  to  the  mother  if  the  father  shall  not 
be  living.     In  all  cases  where  the  appointment 


Disposition  of  Property  by  Will    317 

of  testamentary  guardians  shall  be  desired,  the 
effect  of  special  statutes  must  be  determined  by 
the  lawyers  who  are  to  draw  the  wills. 

With  regard,  now,  to  the  selection  of  executors 
(and,  as  far  as  is  not  inconsistent  with  the  special 
suggestions  which  have  been  made,  the  discussion 
will  apply  to  the  selection  of  guardians  and  trus- 
tees), the  following  principles  and  methods  may 
be  mentioned  and  considered. 

First,  regarding  the  matter  strictly  and  only 
as  a  business  arrangement,  executors  may  be 
selected  from  among  persons  who,  or  institutions 
which,  will  furnish  adequate  security  for  the 
proper  performance  of  the  required  duties ;  second, 
regarding  executorship  as  a  solemn  and  sacred 
duty,  springing  from  the  relations  of  kinship,  or 
of  intimate  and  confidential  friendship,  executors 
may  be  chosen  from  the  lists  of  sterling  friends 
and  relatives,  whose  integrity,  fidelity,  and  ability 
may  safely  be  trusted,  even  to  this  superlative 
extent.  Unfortunately,  there  is  not  always  an 
opportimity  to  choose  between  these  two  prin- 
ciples and  ijiethods.  When  the  fact  that  services, 
which  are  to  be  performed  in  strictly  business 
arrangements,  must  be  paid  for  at  rates  which 
shall  be  satisfactory  to  those  who  are  to  perform 
the  services  shall  be  taken  into  consideration,  it 
will  be  evident  that  only  estates  of  considerable 
magnitudes  will  be  able  to  furnish  the  compensa- 
tions which    will    usually  be    necessary   for   the 


3i8    The  American  Business  Woman 

employment  of  the  first  method.  And  from  this 
statement  it  follows,  as  a  general  proposition, 
that  only  persons  who  shall  be  possessed  of  con- 
siderable amounts  of  property  will  be  able  to 
enjoy  the  full  advantages  of  choosing  between 
the  methods  which  have  been  mentioned.  Per- 
sons who  have  not  been  blessed  with  considerable 
properties,  must  necessarily  be  confined,  in  their 
choices  of  executors,  to  those  among  their  rela- 
tives and  friends  who  shall  be  willing  to  render 
the  required  services,  without  regard  to  com- 
pensation, for  friendship's  sake. 

In  special  cases,  however,  where  the  nimibers 
of  devisees  or  legatees,  or  the  numbers  of  the 
principal  beneficiaries  under  last  wills,  shall  not 
be  large,  the  principles  of  the  first-mentioned 
method  may  be  applied  effectively,  and  without 
regard  to  the  magnitudes  of  estates,  by  appoint- 
ing as  executors  all  those  who  shall  have  direct 
interests  in,  or  those  having  the  principal  interests 
in,  the  wills. 

It  will  not  be  denied  that  there  are  many 
persons  whose  financial  conditions  and  characters 
are  such  as  to  furnish  satisfactory  assurances 
that  any  duties  which  they  may  assume  will  be 
faithfully  performed.  If  such  persons,  who  shall 
be  willing  to  act  in  the  capacities  of  executors, 
cannot  be  found,  and  if  the  first-mentioned 
method  of  selecting  executors  shall  have  been 
decided  upon,  the  persons  who  shall  be  selected 


Disposition  of  Property  by  Will    319 

may  be  required  to  furnish  securities  in  the  form 
of  bonds  for  the  faithful  performance  of  their 
duties;  or  well-known  and  high-standing  trust 
companies  may  be  appointed  to  the  duties  of 
executors. 

Concerning  the  second  method  of  selecting 
executors,  it  may  be  said  that,  if  the  characters 
of  the  persons  who  shall  be  chosen  shall  reach  the 
high  standard  which  must  be  required,  the  duties 
of  their  offices  will,  indeed,  be  performed  in 
ideal  manners;  for,  where  abilities  are  adequate, 
the  highest  type  of  the  performance  of  duties 
must  be  that  which  is  actuated  by  the  affections 
of  conscientious  persons. 

A  common  practice,  especially  in  cases  of 
complicated  and  difficult  characters,  is  the  ap- 
pointing of  lawyers,  who  are  considered  to  be 
entirely  trustworthy  as  executors.  With  regard 
to  the  practice,  it  must  be  said  that  lawyers  of 
ability  may  be  presumed  to  be  competent  for 
the  work  of  executors,  and  that  otherwise  no 
distinction  can  be  properly  made  in  their  favor. 
Indeed,  if  it  shall  become  necessary  to  decide 
definitely,  in  favor  of  or  against  this  practice, 
the  safer  plan  in  the  majority  of  cases  appears 
to  be  to  avoid  the  practice,  unless  there  shall 
be  exceptional  conditions  in  favor  of  particular 
lawyers. 

For  purposes  of  comparison  between  the  two 
general    methods    of    selecting    executors    which 


320  The  American  Business  Woman 

have  been  considered,  the  advantages  of,  and  the 
objections  to,  both  methods  may  be  briefly- 
stated. 

The  principal  advantage  of  the  first  method 
evidently  will  be  the  security  which  it  should 
afford,  and  the  principal  objections  to  the  method 
will  be  a  lack  of  special  interest  on  the  parts  of 
the  executors  (which  will  lead  to  perfimctory 
performances  of  duties,  in  many  cases  by  means 
of  clerks  and  assistants)  and  the  limit  of  appli- 
cation of  the  method  which  has  already  been 
mentioned.  As  has  been  suggested,  the  great 
advantage  of  the  second  method  will  be  the 
earnest  and  devoted  performance  of  duties  which 
it  should  secure,  and  the  corresponding  objection 
must  be  the  difficulties  in  the  selecting  of  persons 
who  shall  possess  the  required  qualities. 

The  appointing,  as  executors,  of  all  persons 
who  shall  have  considerable  interest  in  wills, 
or  of  all  the  principal  beneficiaries  under  wills, 
seems,  without  doubt,  to  be  the  best  method 
which  can  be  suggested  for  the  special  cases  in 
which  its  employment  will  be  practicable. 

With  regard  to  the  most  advantageous  number 
of  executors  to  be  appointed  for  the  purposes 
of  a  single  last  will  and  testament,  it  should 
evidently  be  in  proportion  to  the  duties  which 
are  to  be  performed.  But,  since  executors  may 
employ  reasonable  numbers  of  necessary  assis- 
tants for  clerical  work,   there  are  perhaps  few 


Disposition  of  Property  by  Will    321 

cases  in  which  the  duties  may  not  be  performed 
by  a  single  competent  executor.  In  favor  of  a 
single  executor  it  may  be  also  said  that  the  duties 
of  the  office  may  be  more  systematically  per- 
formed than  where  they  are  distributed  indis- 
criminately among  several.  On  the  other  hand, 
much  may  be  said  in  favor  of  the  selection  of 
several  executors  for  a  single  will.  The  possi- 
bility of  complications  which  may  result  from 
the  death  of  a  sole  executor  will  be  practically 
removed;  and  where  there  shall  be  several  ex- 
ecutors, each,  in  a  measure,  will  or  should  act 
as  a  check  upon  the  others.  The  expenses  of 
administering  estates  should  not  be  materially 
affected  by  the  number  of  the  executors,  since 
ordinarily  the  commissions  are  the  same  whether 
there  shall  be  one  executor  or  several. 

The  better  general  rule  appears  to  be  that 
several  executors  shall  be  chosen,  with  directions 
that,  in  case  of  the  death  of  either  or  any  of  them, 
the  duties  shall  devolve  upon  the  stu^ivor  or 
survivors.  In  cases  where  single  executors  shall 
be  desired,  others  may  be  appointed  to  act  only 
in  case  of  the  deaths  of  the  first-named  executors. 

The  destruction  of  a  will,  as  by  burning  or 
tearing,  with  intent  on  the  part  of  the  testator 
to  destroy  it,  of  course  acts  as  a  revocation. 
So  a  will  is  ordinarily  revoked  by  the  making  and 
execution  of  a  subsequent  one;  and  the  destruc- 
tion of  a  subsequent  will  does  not  always  act 


322    The  American  Business  Woman 

to  revive  a  former  one.  According  to  the  various 
laws  of  the  different  States,  a  will  may  be  also 
revoked,  in  some  cases,  by  the  marriage  of  the 
testator  or  testatrix,  and  in  others,  by  the  mar- 
riage of  the  testator  or  testatrix  and  the  birth 
of  a  child. 

Succession  Taxes. — In  most,  if  not  all  the 
States,  a  tax  is  imposed  upon  the  estates  of  de- 
cedents, whether  testate  or  intestate,  varying 
materially  in  the  different  States,  and  subject 
more  or  less  to  changes  by  amendment  and  revi- 
sion of  the  laws. 

This  tax  is  variously  called  a  succession  tax, 
legacy  tax,  inheritance  tax,  or  transfer  tax;  it  is 
generally  due  in  any  particular  case  at  the  time 
of  death  of  the  decedent,  and  is  governed  by  the 
laws  which  are  in  force  at  that  time. 

The  laws  of  the  different  States  quite  generally 
exempt  from  the  operation  of  this  tax  personal 
property  to  certain  amounts,  prescribed  by  the 
statutes,  and  real  property  which  is  devised,  or 
descends  to  father,  mother,  husband,  or  wife, 
children,  brothers,  and  sisters.  The  tax,  there- 
fore, is  sometimes  called  a  collateral  inheritance 
tax.  The  amoimt  or  percentage  of  the  tax  may 
also  vary  with  the  relationship  between  the  dece- 
dent and  the  beneficiaries.  A  succession  tax  upon 
a  particular  legacy  is  generally  payable  out  of 
the  legacy  itself  and  the  executor  or  adminis- 


Disposition  of  Property  by  Will  323 

trator  is  required  to  deduct  the  amount  of  the 
tax,  before  paying  the  legacy  to  the  beneficiary. 

Upon  receiving  letters  testamentary,  the  ex- 
ecutor (or  upon  receiving  letters  of  adminis- 
tration, the  administrator)  must  apply  to  the 
surrogate,  or  proper  probate  officer  for  the  ap- 
pointment of  appraisers  to  determine  the  amount 
of  the  tax.  Since  proceedings  of  this  kind  are 
usually  technical  and  complicated,  and  since 
often  penalties  are  charged  against  estates  if 
these  taxes  are  not  paid  within  prescribed  times, 
executors  and  administrators  may  advanta- 
geously consult  with  their  lawyers  concerning 
the  matters,  without  delay. 

In  order  that  provisions  in  wills  may  be  more 
intelligently  made,  the  lawyers  drawing  the 
wills  may  be  consulted  with  reference  to  the 
effects  of  succession  taxes  upon  the  estates  for 
the  disposition  of  which  the  wills  are  to  be  made. 


CHAPTER  XI 

GUARDIANS,  EXECUTORS,  AND  ADMINISTRATORS 

A  CONSIDERABLE  portion  of  the  preceding 
chapter  has  been  devoted  to  the  considera- 
tion of  the  offices  of  guardians  and  executors, 
from  the  standpoints  of  testators.  The  duties 
and  responsibilities  of  these  offices  remain  to  be 
considered  from  the  standpoints  of  those  who  have 
been  or  who  may  be  called  upon  to  occupy  such 
positions. 

To  conscientious  lovers  of  children,  who  shall 
have  also  moderate  business  abilities,  the  duties 
of  guardians  will  not  prove  to  be  extraordinarily 
difficult.  While  such  duties  should  not  be  as- 
sumed without  careful  and  adequate  considera- 
tion of  all  the  possibilities  which  may  be 
involved  in  particular  cases;  neither  should  they 
be  shirked  by  those  who  shall  be  competent. 
The  avoiding  of  the  duties  of  guardians  by  those 
who  ought  to  assume  them  may  be  the  means 
of  placing  them  in  the  hands  of  far  less  capable 
and  conscientious  persons. 

Duties   of   Guardians. — After  having  com- 
324 


Duties  of  Guardians  3^5 

plied  with  the  preliminary  requirements  of  the 
law,  the  first  duties  of  the  guardian  of  the  person 
and  estate  of  an  infant  will  be  to  receive  the 
person  and  the  estate  of  the  infant  from  the  hands 
of  the  executors  or  others  who  may  have  the 
temporary  custody,  and  to  make  a  careful  and 
complete  inventory  and  account  of  the  property 
of  the  ward. 

The  regular  and  continuing  duties  of  guardians 
will  be  the  management  of  the  estates  of  their 
wards  (of  which  complete  accounts  must  always 
be  kept,  charging  the  estates  with  all  necessary 
and  lawful  expenditures  and  crediting  them  with 
all  incomes,  increases,  and  profits),  and  the  main- 
tenance, training,  and  education  of  the  wards. 

For  the  proper  management  of  the  estates  of 
wards,  the  precautious  principles  which  have  been 
expounded  in  this  work,  when  supplemented  by 
the  suggestions  which  will  follow  in  this  place, 
should  be  entirely  sufficient.  Perhaps,  in  the 
majority  of  cases,  it  may  be  said  that  the  duties 
of  guardians,  with  respect  to  the  estates  of  their 
wards,  will  have  been  satisfactorily  performed  if, 
at  the  terminations  of  their  offices,  their  wards 
shall  have  been  properly  provided  for  and  edu- 
cated without  any  depreciation  of  the  values  of 
their  estates;  or,  in  other  words,  if  the  estates 
shall  have  been  so  managed  that  the  incomes  will 
have  been  sufficient  for  the  proper  support  and 
education  of  the  wards. 


326    The  American  Business  Woman 

But,  evidently,  this  proposition  must  be  quali- 
fied in  accordance  to  the  magnitudes  of  the  es- 
tates of  wards.  If  the  estate  of  a  ward  shall  be 
so  small  that  it  cannot  possibly  furnish  an  income 
which  will  be  sufficient  for  the  support  and  edu- 
cation of  the  ward,  the  principal  of  the  estate 
must,  under  the  permission  of  the  courts,  neces- 
sarily be  used;  and  the  ward  must  be  prepared, 
as  wisely  and  as  speedily  as  is  possible,  for  the 
necessity  of  self-support. 

If,  on  the  contrary,  the  estate  of  a  ward  shall 
be  much  larger  than  is  necessary  for  the  furnish- 
ing of  a  sufficient  income,  the  duties  of  the  guar- 
dian, with  respect  to  the  management  of  the 
estate,  will  be  fulfilled  only  by  the  securing  of  a 
proper  and  corresponding  increase  in  the  prin- 
cipal of  the  estate. 

The  office  of  guardian  is  a  strictly  fiduciary  one, 
and  guardians  are  entitled  to  no  profits  or  benefits, 
except  the  compensations  which  are  allowed  by, 
and  specified  by,  the  laws,  from  the  estates  of  their 
wards.  Therefore  all  profits  and  increases  must 
be  credited  to  the  estates  of  the  wards,  and  must 
also  be  strictly  accounted  for  by  the  guardians. 

The  maintenance,  training,  and  education  of 
wards  must  be  in  accordance  with  their  pros- 
pective social  and  financial  positions.  Thus, 
wards  of  ample  wealth  and  belonging  to  families 
of  high  social  standing  will  be  entitled  to  the 
proper  luxuries  of  maintenance  and  of  education; 


Executors  and  Administrators     327 

while  those  who  will  be  compelled  to  earn  their 
livings  by  their  own  efforts  must  be  trained  in 
frugaHty  and  industry,  and  educated  in  the 
directions  which  will  be  necessary  for  their  self- 
support.  But,  in  all  cases,  it  cannot  be  doubted 
that  wards  should  be  thoroughly  inculcated  with 
the  knowledge  and  appreciation  of  the  true  value 
of  property,  and  of  the  rightful  purposes  and 
employments  for  which  it  is  chiefly  to  be  prized. 
Guardians  who  are  appointed  by  the  courts 
are  usually  required  to  render  annual,  or  other 
periodical  accounts  of  the  conditions  of  the 
estates  which  have  been  placed  in  their  hands; 
and  all  guardians  who  shall  have  charge  of  the 
properties  of  wards  will  be  required  to  render 
final  accounts  of  the  conditions  of  the  estates 
before  they  can  be  legally  discharged  from  their 
duties.  The  necessity  that  guardians  shall  keep 
complete  accounts  of  all  receipts  and  disburse- 
ments which  are  connected  with  the  estates  of 
their  wards,  and  that  they  shall  obtain  and  pre- 
serve receipts  or  vouchers  for  all  expenditures, 
will  therefore  be  at  once  evident. 

Duties  of  Executors  and  Administrators. — 

Many  persons,  who  are  entirely  unacquainted 
with  the  duties  of  executors  and  administrators 
find  themselves  placed  in  positions  of  quandary 
and  embarrassment  by  the  death  of  relatives  or 
friends,  who  have  selected  them  for  the  duties 


328    The  American  Business  Woman 

of  executors,  under  the  provisions  of  last  wills 
and  testaments,  or  by  the  dying  intestate  of 
relatives  for  whose  estates  they  must  act  as 
administrators.  For  the  benefit  and  instruction 
of  such  persons,  the  principal  regular  duties  of 
executors  and  administrators  will  be  explained, 
with  such  suggestions  as  may  appear  to  be  neces- 
sary for  their  assistance  in  the  premises. 

Before  entering  upon  the  discussion  of  the 
duties  of  executors  and  administrators,  however, 
it  will  be  well  to  call  attention  to  the  fact  that 
executors  and  administrators  have  charge  of  the 
personal  property  only  of  decedents,  the  title 
to  real  property  passing  directly  to  the  heirs  or 
devisees,  unless,  by  special  provisions  in  their 
wills,  decedents  shall  direct  otherwise. 

The  chief  point  of  difference  between  executors 
and  administrators  is  that  the  former  act  by 
virtue  of  appointments  to  certain  duties  which 
are  contained  in  last  wills  and  testaments,  and 
the  latter  act  by  virtue  of  appointments  to 
similar  duties,  in  cases  of  intestacy,  by  courts 
having  charge  of  probate  matters.  The  order 
in  which  the  relatives  of  intestates  are  entitled 
to  appointment  as  administrators  is  generally 
prescribed  by  the  laws  of  the  States  in  which 
intestates  shall  have  lived  or  died.  Generally 
speaking,  surviving  husbands  or  wives  of  dece- 
dents are  preferred,  and  after  them  the  order 
of  the  next-of-kin  is  substantially  followed,  pro- 


Executors  and  Administrators    329 

vided  the  order  shall  not  be  disturbed  by  renunci- 
ation, or  disqualification  on  account  of  insanity 
or  other  legal  incapacity. 

The  first  duty  of  an  executor,  or  of  a  person 
who  shall  be  entitled  to  act  as  an  administrator 
will  be  to  attend  to  the  burial  of  the  decedent; 
and  this  should  be  done  in  a  manner  which  is 
in  keeping  with  the  estate  of  the  decedent,  or 
in  accordance  with  the  instructions  which  may 
be  contained  in  the  will.  Next  in  order  of  the 
duties  of  an  executor,  will  be  the  proving  of  the 
decedent's  will,  and  the  obtaining  of  letters  testa- 
mentary ;  and  the  corresponding  duty  of  a  person 
who  shall  be  entitled  to  the  administration  of  the 
estate  of  an  intestate  will  be  to  obtain  from  the 
proper  court  letters  of  administration. 

These  duties  will  always  involve  technical, 
legal  proceedings;  the  services  of  competent 
lawyers,  for  the  purpose  of  obtaining  letters 
testamentary  and  letters  of  administration,  can- 
not, therefore,  be  properly  dispensed  with.  The 
practical  statement  of  the  duty  which  is  in  ques- 
tion will  therefore  be  that  an  executor  named  in 
a  will,  or  a  person  who  is  entitled  to  the  admin- 
istration of  an  intestate's  estate,  should,  at  the 
first  opportunity,  give  the  necessary  information 
and  instruction  to  a  reputable  and  competent 
lawyer. 

Letters  testamentary  and  letters  of  adminis- 
tration are  issued  out  of  the  courts  having  juris- 


330    The  American  Business  Woman 

diction  over  probate  matters,  and  constitute  the 
legal  authority  by  which  executors  and  adminis- 
trators respectively  are  entitled  to  the  possession 
of  the  estates  of  decedents.  Until  these  letters 
shall  have  been  regularly  obtained,  therefore,  an 
executor  who  is  named  in  a  will,  or  a  person  who 
is  entitled  to  the  administration  of  an  estate, 
will  have  no  strict  right  to  the  custody  of,  or 
interference  with,  the  estates  or  affairs  of  the 
deceased.  In  case  there  shall  be  danger  of  theft 
or  loss  of  property  belonging  to  the  estate  of  a 
decedent,  however,  the  executor  named  in  the 
will,  or  the  person  who  is  entitled  to  the  adminis- 
tration, may  safely  assume  the  responsibility  of 
taking  possession  of  such  property  for  purposes, 
of  preservation. 

A  wise  precaution,  in  all  such  cases,  will  be 
the  providing  of  responsible  witnesses  as  to  all 
properties  which  shall  be  taken  possession  of  in 
this  manner. 

With  the  obtaining  of  letters  testamentary  or 
of  letters  of  administration,  the  distinctions  in 
the  general  duties  of  executors  and  administrators 
will  practically  cease,  with  the  exception  that  the 
former  must  distribute  the  estates  for  which 
they  are  executors  according  to  the  directions 
which  are  contained  in  the  last  wills  and  testa- 
ments, and  the  latter  must  perform  these  duties 
according  to  the  laws  for  the  distribution  of  the 
property    of    intestates.     The    consideration    of 


Executors  and  Administrators     331 

the  duties  of  executors  which  follows,  will  apply, 
therefore,  equally  to  those  of  administrators. 

Perhaps  the  most  important  duty  of  executors, 
as  well  as  the  one  which  will,  in  many  cases, 
afford  the  greatest  difficulties,  will  be  the  col- 
lection of  the  assets  belonging  to  the  estates  of 
the  decedents. 

All  articles  of  personal  property  which  may  be 
lost  or  stolen  (such  as  money,  bonds,  stocks, 
clothing,  jewelry,  books,  pictures,  etc.)  should 
be  secured  and  placed  in  safe  keeping;  for  exec- 
utors will  be  personally  liable  for  any  losses  to  the 
estates  of  which  they  have  charge  which  shall 
be  due  to  their  carelessness  or  improper  conduct. 

All  bank-books,  account-books,  letters,  mem- 
orandum books,  and  documents  of  every  de- 
scription belonging  to  the  estates,  should  at  once  be 
taken  possession  of  by  the  executors;  and  these, 
at  the  earliest  opportunities,  should  be  subjected 
to  careful  examination  for  the  purpose  of  dis- 
covering and  of  locating  any  property  which  may 
otherwise  escape  the  notice  of  the  executors. 

All  personal  property  must  be  taken  into  the 
actual  custody  of  the  executors  at  the  earliest 
possible  opportunities,  and  if  possession  cannot 
be  acquired  by  ordinary  and  peaceable  means 
it  will  be  the  duty  of  executors  to  take  the  neces- 
sary legal  proceedings  without  hesitation  or 
delay.  Not  only  the  law  requires  executors  to 
exercise  all  reasonable  diligence  in  the  collection 


332    The  American  Business  Woman 

of  assets,  and  holds  them  to  strict  account;  but 
conscience  and  moral  duty  require  that  every 
article  of  value — every  cent — which  of  right 
belongs  to  the  estates  which  they  are  adminis- 
tering, shall  be  obtained  for  the  benefit  of  those 
who  are  to  share  in  the  distributions.  The  prin- 
ciple upon  which  the  duties  which  are  now  under 
consideration  depends  is,  evidently,  that  the 
largest  possible  and  lawful  amounts  of  property 
are  to  be  collected.  The  sound  judgment  of 
executors  must,  however,  be  exercised  to  prevent 
the  useless  wasting  of  assets  in  vain  attempts  to 
recover  property  which  shall  be  of  little  or  no 
value,  or  the  recovery  of  which  shall  be  extremely 
improbable. 

Executors  are  generally  required  by  law  to 
make  and  file  inventories  of  all  assets  which  have 
come  into  their  hands  or  of  which  they  shall  have 
knowledge.  Such  inventories  must  contain  de- 
scriptions and  valuations  of  atl  articles  of  per- 
sonal property,  of  debts  which  may  be  due  to  the 
estates  of  the  decedents,  and  of  all  other  assets 
which  can  be  discovered.  The  laws  of  the  differ- 
ent States  provide  for  the  manners  and  times  in 
which  inventories  of  this  kind  shall  be  made  and 
filed,  and  also  for  the  selection  of  appraisers  for 
the  purposes  of  the  valuations.  Such  matters, 
as  also  all  other  matters  which  shall  depend  upon 
the  special  statutes  of  the  States  in  which  execu- 
tors shall  act,  must  be  determined  by  consulta- 


Executors  and  Administrators     333 

tions  with  the  lawyers  having  charge  of  the  legal 
affairs  of  the  executors. 

The  powers  of  executors  are  in  general  very- 
broad;  the  fundamental  principle  being  that, 
subject  only  to  special  provisions,  which  shall 
be  contained  in  the  wills,  they  stand  in  the  places 
of  the  decedents  whom  they  represent.  Ex- 
ecutors may,  therefore,  sue  and  be  sued  in  their 
representative  capacities;  they  may,  in  good  faith, 
compromise  claims  and  subject  disputed  matters 
to  arbitration;  they  may  sell  and  even  mortgage 
the  assets  belonging  to  the  estates;  they  may  in- 
dorse notes  which  are  payable  to  the  orders  of 
the  decedents,  and  bind  the  estates  of  the  dece- 
dents by  completing  the  unfinished  contracts  of 
the  decedents,  and  by  the  employment  of  the 
necessary  attorneys  and  agents.  But,  in  the 
exercise  of  these  extensive  powers,  executors  may 
well  proceed  with  prudence  and  with  caution, 
seeking  reasonable  aid  whenever  such  shall  be 
necessary ;  since,  in  addition  to  the  fact  that  such 
a  manner  of  proceeding  will  be  included  among 
their  moral  duties  toward  the  estates  of  which 
they  have  the  management,  they  will  be  made 
personally  liable  for  the  results  of  all  acts  which 
may  savor  of  fraud,  collusion,  or  gross  carelessness. 

Executors  are  bound  to  ascertain  all  legal  debts 
or  liabilities  of  the  decedents,  and  to  pay  and 
discharge  them  when  the  amounts  of  assets  shall 
be  sufficient.     And  for  these  purposes  the  laws 


334    The  American  Business  Woman 

commonly  provide  methods  of  advertising  for 
claims  against  the  estates,  and  specify  the  times 
of  payment  of  claims,  and  the  order  of  priority 
in  the  payment  of  certain  kinds  of  debts.  These 
are  evidently  matters  to  be  determined  by  the 
lawyers,  and  are  also  matters  which  must  not 
be  disregarded,  lest,  -by  improper  payments, 
executors  may  be  compelled  to  sustain  the  losses 
themselves. 

All  assets  belonging  to  the  estates  of  decedents 
having  been  collected,  and  the  debts  of  the  de- 
cedents having  been  regularly  discharged,  accord- 
ing to  the  requirements  of  the  laws,  executors 
must  pay  the  bequests  and  legacies  which  are 
provided  for  by  the  wills,  and  must  otherwise 
carry  out  the  directions  which  are  contained  in 
the  wills ;  taking  care,  however,  that  no  payments 
of  legacies  shall  be  made  until  the  times  which 
may  be  provided  by  the  laws  for  such  payments, 
that  legacies  shall  be  paid  to  the  persons  who  are 
entitled  to  receive  them,  and  that,  in  all  cases, 
receipts  for  the  payments,  stating  the  amounts 
(or  specific  articles)  which  have  been  paid,  and 
the  purposes  for  which  they  have  been  paid,  shall 
be  required. 

Sometimes  wills  may  contain  complicated  or 
ambiguous  provisions  and  directions  which  will 
result  in  difficulties  and  embarrassments  for  the 
executors.  In  all  such  cases,  executors  must  seek 
competent  legal  advice,  and,  if  necessary,  the  aid 


Executors  and  Administrators     335 

of  the  coiirts  for  the  definite  construction  of 
embarrassing  provisions  and  for  instructions  con- 
cerning the  duties  of  the  executors  must  be  in- 
voked. With  assistance  of  such  a  character, 
the  administering  of  estates  will  generally  prove 
not  to  be  beyond  the  abilities  of  ordinary  persons. 

With  regard  to  the  general  nile  for  the  proper 
administration  by  executors  of  the  estates  of 
decedents,  it  may  be  said  that  the  law  requires 
them  to  act  with  perfect  good  faith,  and  with 
such  skill,  prudence,  and  diligence  as  men  ordi- 
narily bestow  upon  their  own  affairs. 

The  final  duty  of  executors  is  the  rendering  of 
complete  accounts  of  all  transactions  which  they 
shall  have  had  concerning  the  estates  which  they 
have  administered.  The  final  accounting  and 
the  discharge  of  executors  from  their  duties  and 
liabilities  which  follows,  usually  by  orders  of  the 
probate  courts,  terminate  the  direct  relations 
of  executors  with  the  estates  of  the  decedents. 

The  final  accounting  and  the  discharge  of 
guardians  take  place  when  their  wards  shall  have 
reached  the  ages  at  which  they  shall  be  entitled 
by  law  to  the  custody  of  their  own  properties,  and 
when  the  duties  of  the  guardians  shall  have  been 
completed. 


CHAPTER  XII 

MISCELLANEOUS 

Married  Women. — ^The  legal  disabilities  of 
married  women  were  formerly  almost  complete. 
They  were  regarded  as  incapable  of  managing 
their  own  affairs,  and  their  very  personalities 
were  regarded  as  being  merged  in  the  personalities 
of  their  husbands.  The  property  of  a  woman 
became,  upon  her  marriage,  the  property  of  her 
husband;  whatever  sums  she  might  earn  during 
marriage,  belonged  to  her  husband;  she  could 
no  longer  make  legal  contracts;  and  her  husband 
was  liable  for  her  torts.  But  in  the  United 
States  gradually  these  disabilities  have  been 
done  away  with,  until  married  women  now  find 
themselves  almost  without  special  disabilities. 

The  theory  of  the  merged  personalities — that 
husband  and  wife  are  one  person,  represented 
entirely  by  the  husband — has  so  far  disappeared 
in  the  United  States  that  married  women  may 
now  commonly  make  legal  contracts,  not  only 
with  others,  but  even  with  their  husbands. 

336 


Miscellaneous  337 

A  husband,  as  the  head  of  the  family,  confers 
the  family  name  and  selects  and  fixes  the  family 
domicile.  He  is  bound  to  support  his  wife  in  a 
manner  suitable  to  his  circumstances  and  the  law 
compels  him  to  provide  for  her  out  jof  his  estate 
after  his  death,  the  rule  being  that  the  wife  takes 
a  life  interest  in  one-third  of  his  real  property 
(dower)  and  a  portion  of  his  personal  property 
varying  in  different  States,  and  according  to 
other  conditions,  such  as  number  of  children, 
husbands'  parents,  etc.  A  wife  is  bound  to 
render  proper  family  services  and  her  husband 
is  entitled  to  her  society  and  cohabitation. 

The  laws  of  the  different  States  concerning 
the  rights,  powers,  and  disabilities  of  married 
women  are  far  from  uniform.  When  it  shall  be 
necessary  for  married  women  to  ascertain  their 
exact  status  in  the  law,  they  must  have  recourse 
to  the  statutes  of  the  particular  States  in  which 
they  reside,  or  in  which  their  real  property  is 
located. 

These  statutes,  called  generally  "married  wo- 
men's acts"  are  subject  to  such  frequent  changes 
that  it  is  not  considered  advisable  to  give  even 
a  summary  of  them  here.  The  general  tendency 
of  the  married  women's  acts  is  to  remove  more 
and  more  the  disabilities  imposed  by  the  common 
law,  and  doubtless  the  time  is  not  far  distant 
when  married  women  will  find  themselves  freed 
from   all   special   disabilities  and  authorized  in 


33^    The  American  Business  Woman 

all  respects  to  act  concerning  their  property  as 
if  single. 

The  following  general  statements  will  prove 
of  service  in  cases  where  a  more  precise  knowledge 
may  not  be  necessary : 

In  most  of  the  States  a  married  woman  has  her 
right  of  dower,  of  which  her  husband  cannot 
deprive  her,  without  her  consent,  and  likewise  in 
many  of  the  States  the  husband's  right  of  courtesy 
is  established. 

The  property  of  a  married  woman  acquired 
before  or  after  marriage  (sometimes  with  the 
exception  of  property  acquired  after  marriage 
from  her  husband)  is  generally  her  separate 
property,  free  from  the  debts  or  control  of  her 
husband.  In  some  of  the  States,  however,  provis- 
ions are  made  in  the  statutes  for  common  or  com- 
munity property  between  husbands  and  wives. 

In  many  of  the  States  a  married  woman  may 
convey  her  real  property  without  the  consent 
of  her  husband,  as  if  single,  though  in  some  States 
she  has  not  this  authority  unless  abandoned  by 
her  husband,  and  in  others,  the  husband  is  re- 
quired to  join  with  her  in  the  execution  of  deeds 
concerning  her  real  property.  So  generally  a 
married  woman  of  legal  age  may  dispose  of  her 
separate  property  by  will,  without  the  consent 
of  her  husband,  although  in  some  of  the  States, 
she  cannot  deprive  her  husband  of  his  right  of 
courtesy,  without  his  consent. 


Miscellaneous  339 

A  married  woman  may  generally  (at  least  with 
respect  to  her  separate  property)  make  contracts, 
as  if  unmarried,  though  in  some  of  the  States 
she  is  not  authorized  to  contract  with  her  husband, 
or  to  become  surety,  or  accommodation  endorser. 

So  generally  she  may  sue  and  be  sued  alone  as  if 
single,  with  reference  to  her  contracts  and  touching 
her  separate  estate. 

In  many  of  the  States  a  married  woman  may 
engage  in  trade  or  business  on  her  own  accoimt, 
and  has  then  all  the  rights  and  liabilities  of 
tradesmen  and  business  men  generally.  In  some 
of  the  States  she  is  not  authorized  to  transact 
business  on  her  own  account,  without  the  consent 
of  the  court. 

When  property  has  been  paid  for  by  a  married 
woman's  money,  and  the  title  to  the  property 
has  been  taken  in  her  husband's  name,  without 
her  consent,  the  property  is  generally  regarded 
as  a  part  of  her  separate  estate,  and  the  husband 
is  accountable  to  her  as  trustee  of  the  property. 
But  where  a  husband  has  paid  for  property  with 
his  own  money,  and  has  taken  title  to  the  prop- 
erty in  his  wife's  name,  the  law  generally  presumes 
that  the  property  has  been  purchased  for  the 
benefit  of  the  wife,  and  the  burden  of  proof  is  put 
upon  the  husband  to  show  that  he  intended  to 
establish  a  trust  for  his  own  benefit. 

Although  a  husband  is  entitled  generally  to 
the  services  of  his  wife,  the  savings  and  increases 


340    The  American  Business  Woman 

from  her  separate  estate,  even  though  she  may 
devote  considerable  time  to  the  management  of 
it,  will  generally  be  considered  a  part  of  her  sepa- 
rate estate,  and  the  husband  will  have  no  legal 
interest  in  the  increase.  So  also  the  earnings  from 
the  personal  services  of  a  married  woman  (except 
in  her  husband's  household  and  with  certain 
other  limitations),  and  the  proceeds  of  her  sepa- 
rate trade  or  business,  in  many  of  the  States,  are 
declared  to  be  parts  of  her  separate  estate  and 
free  from  the  control  of  her  husband 

In  some  of  the  States  a  married  woman  must 
support  her  husband,  if  he  is  unable  to  support 
himself,  and  in  other  States  she  is  liable  for  family 
necessities  and  the  support  of  her  children. 

Concerning  the  distribution  of  a  married 
woman's  estate  upon  her  death,  without  leaving 
a  will,  the  rule  is  that  her  property  is  divided 
between  her  husband  and  children  (if  any)  in 
certain  proportions  varying  considerably  in  the 
different  States,  and  that,  if  she  leaves  no  chil- 
dren (and  in  some  of  the  States  no  kin)  the  husband 
takes  all  her  property. 

A  married  woman,  and  not  her  husband,  is 
liable  in  law  for  her  torts  and  crimes  committed 
without  the  consent  of  her  husband. 

Divorce. — There  are  two  general  kinds  of 
divorce,  a  vinculo  matrimonii  (from  the  bonds  of 
matrimony),  or  an  absolute  divorce,  and  a  mensa 


Miscellaneous  341 

et  ihoro  (from  board  and  bed) ,  or  a  legal  separation, 
of  husband  and  wife.  Adultery  (either  a  single 
offence  or  living  in  adultery)  is  a  uniform,  and  in 
some  of  the  States,  the  only  ground  for  absolute 
divorce. 

Desertion,  failure  to  support,  cruelty,  habitual 
drunkenness,  and  imprisonment  for  felony  are 
various  grounds,  in  some  States  for  absolute 
divorce,  and  in  others  for  legal  separation. 

There  are  also  statutes  providing  for  the  legal 
annulment  of  marriages  upon  the  general  ground 
that  they  have  been  illegally  contracted,  because 
one  of  the  parties  has  not  reached  the  legal  age 
of  consent ;  a  former  marriage  was  still  in  force ; 
one  of  the  parties  was  insane;  the  consent  of 
one  of  the  parties  was  obtained  by  fraud  or  force; 
or  that  one  of  the  parties  was  physically  in- 
capable of  entering  the  marriage  relation. 

It  frequently  happens  that  women  of  means  are 
united  by  marriage  to  husbands  who  have  little 
or  no  property  of  their  own.  Without  considering 
the  proprieties  of  such  unions,  it  may  be  said  that,  if 
husbands  shall  be  possessed  of  proper  manly 
spirits,  such  circumstances  will  be,  to  a  certain 
extent,  constant  humiliations  to  them,  and  wives 
may  very  wisely  do  all  reasonable  things  which 
may  be  in  their  abilities,  to  relieve  their  husbands 
of  such  disagreeable  sensations.  To  this  end 
wives  may  avoid  all  unnecessary  public  reference 
(even  among  their  closest  friends)  to  their  own 


342    The  American  Business  Woman 

properties  and  means;  and,  while  they  should 
carefully  maintain  the  titles  to  their  properties 
(or  in  other  words  their  principals)  in  their  own 
names,  they  may  allow  their  husbands  to  receive 
their  incomes,  to  keep  their  bank  accounts,  and 
to  pay  the  household  bills  with  their  (the  hus- 
bands') own  checks.  By  so  doing,  wives  will  in 
no  degree  demean  or  humiliate  themselves;  they 
will  place  no  more  confidence  in  their  husbands 
than  they  are  often  obliged  to  place  in  their 
lawyers  or  their  agents;  and  they  will  place  their 
husbands,  before  the  world,  in  the  positions  which 
they  are  universally  expected  to  occupy. 

Whether  or  not  wives  should  permit  their 
husbands  to  take  charge  of  their  principals,  and  to 
manage  their  investments,  will  evidently  depend 
upon  the  relative  abilities  of  husbands  and  wives 
in  particular  cases. 

Life  Insurance. — Life  insurance  may  be 
defined  as  a  contract  by  which  the  life  insurance 
company,  for  a  dertain  consideration,  agrees  to 
pay,  at  a  specified  time,  or  at  the  death  of  the 
person  insured,  a  certain  amoimt  of  money,  to 
beneficiaries,  named  in  the  contract. 

The  written  or  printed  contract  is  called  the 
policy;  the  life  insurance  company  the  in- 
surer; the  person  at  whose  death  the  amount  of 
the  policy  is  to  be  paid,  the  insured;  the  amount 
paid  as  the  consideration  for  the  contract,   the 


Miscellaneous  343 

premium;  and  the  person  to  whom  the  amount  of 
the  policy  is  to  be  paid,  the  beneficiary. 

Premiums  are  generally  paid  in  annual,  semi- 
annual, or  quarterly  instalments  during  the  lives 
of  the  insured.  The  question  whether  a  life- 
insurance  company  shall  gain  or  lose  by  a  par- 
ticular insurance,  therefore,  depends  entirely  upon 
how  long  the  insured  shall  live  to  pay  the  in- 
stalments of  premium.  After  long  and  careful 
investigation  and  experience  the  life-insurance 
companies  have  established  rules  and  tables  by 
means  of  which  they  are  able  to  calculate  the 
probable  lengths  of  lives  for  certain  conditions  of 
age,  health,  occupation,  etc.  The  condition  of 
health  is  determined  by  physical  examinations 
of  applicants  by  the  examining  physicians  of  the 
companies,  and  the  remaining  conditions  are 
determined  by  the  statements  (called  represen- 
tations or  warranties)  of  the  applicants.  Any 
fraud,  or  concealment,  in  the  representations, 
made  by  the  insured  voids  or  forfeits  the  policy, 
and  a  default  in  the  payment  of  instalments 
of  premium,  or  other  agreements  to  be  performed 
by  the  insured,  in  general,  forfeits  or  causes  the 
policy  to  lapse,  though  the  life-insurance  com- 
panies commonly  allow  certain  days  of  grace 
(with  certain  penalties),  and  make  provisions 
for  reinstatement  (upon  paying  charges,  interest, 
etc.)  after  policies  have  been  forfeited. 

There  are  also  many  provisions,  which   may 


344    The  American  Business  Woman 

be  included  in  life-insurance  policies  (such  as 
non-liability  in  case  of  suicide ;  authority  to  change 
beneficiaries;  participation  in  the  distribution 
of  surpluses;  restrictions  upon  travel,  residence, 
or  hazardous  occupations;  incontestability  of 
policies  after  a  certain  number  of  years;  provisions 
for  loans  upon  policies  and  siirrender  values,  etc.) 
which  need  not  be  further  referred  to  here.  The 
premium  of  a  life-insurance  policy  may  be  made 
payable  in  one  payment,  in  which  case  (as  also 
any  policy  upon  which  all  the  required  pay- 
ments have  been  made)  the  policy  is  called  a 
paid-up  policy. 

Premiums  may  also  be  made  payable,  in  terms, 
for  a  certain  number  of  years  or  in  a  certain 
number  of  payments  (instead  of,  in  terms,  during 
the  entire  life  of  the  insured).  Such  premiums 
are  called  limited  payment  policies — twenty-pay- 
ment policies,  thirty-payment  policies,  etc. 

An  endowment  policy  is  one  in  which  the  amount 
which  is  to  be  paid  at  the  death  of  the  insured 
is  also  made  payable  at  the  expiration  of  a  certain 
number  of  years,  though  the  insiired  be  living 
at  that  time. 

The  general  plan  of  insurance  may  be  described 
as  follows:  a  person  upon  whose  earnings  the 
maintenance  of  others  depends,  in  order  to  render 
the  dependent  ones  safe  against  poverty  in  the 
event  of  his  (or  her)  death,  or  (in  the  case  of  an 
endowment  policy)  incapacity  from  age,  insures 


Miscellaneous  345 

his  (or  her)  life,  and  in  case  of  the  death  of  the 
insured,  the  beneficiaries  are  paid  by  the  life- 
insurance  company  the  amount  of  the  policy — - 
it  may  be  an  amount  much  larger  than  the  instired 
could  provide  in  any  other  manner. 

It  is  to  be  presumed  that  the  life-insurance 
companies,  in  average  cases,  make  profits  out 
of  the  transactions,  and  therefore,  in  average 
cases,  economy  and  proper  management  will 
enable  a  person  to  accumulate  a  greater  amount 
of  property,  in  a  lifetime,  than  the  amounts  paid 
by  the  life-insurance  company.  But  obviously 
this  can  only  be  true  in  cases  where  persons  shall 
live  as  long  or  longer  than  the  probable  lengths 
of  lives  as  calculated  by  the  mortality  tables  of 
the  life-insurance  companies.  Since  we  cannot 
be  certain  of  living  so  long  and  assuredly  ought 
not  be  willing  to  take  the  chances,  the  plan  of 
life  insurance  is  to  be  recommended  in  all  proper 
cases. 

With  regard  to  the  selection  of  a  life-insurance 
company,  the  simple  rule  should  be  to  insure 
only  in  well  known,  large  and  high  standing 
companies;  never,  under  any  circumstances,  in 
small  companies,  or  in  any  of  the  beneficial 
associations  or  corporations  claiming  to  act  as 
better  substitutes. 

The  briefest  examination  of  the  subject  of  life 
insurance,  by  means  of  the  rules  of  investment 
which  have  been  laid  down,  will  show  that  life 


34^    The  American  Business  Woman 

insurance  is  not  to  be  considered  at  all  as  a  means 
of  investment;  although  it  will  be  admitted  that 
the  method  of  endowment  insurance  may  be  of 
benefit  to  persons  who  are  improvident  and  in- 
competent in  the  investment  and  preservation  of 
property. 

Life  insurance,  indeed,  is  not  intended  as  a 
means  of  investment;  but  as  a  security  and  pro- 
tection against  the  unfortunate  events  of  an 
uncertain  future. 

Scarcely  an  institution  can  be  named,  which 
has  been  of  greater  benefit,  in  its  proper  field, 
than  life  insurance.  It  is  therefore  fairly  en- 
titled to  our  strongest  recommendation  and 
encouragement. 

Life  Annuities. — Under  certain  conditions  of 
age,  physical  or  other  incapacity,  and  smallness 
of  principal,  it  sometimes  becomes  necessary  to 
discover  some  method  of  obtaining,  even  at 
eventual  sacrifices,  larger  relative  incomes  than 
may  be  obtained  by  means  of  any  of  the  regular 
methods  of  investment. 

If  we  suppose  the  case  of  an  aged  woman  whose 
entire  principal  has  become  reduced  to  a  few 
thousand  dollars,  and  who  is  entirely  dependent 
upon  it  for  support,  it  will  be  at  once  evident  that, 
unless  by  some  means  the  regular  annual  income 
from  this  small  principal,  during  the  few  re- 
maining years  of  her  life,  may  be  increased  to  much 


Miscellaneous  347 

more  than  the  ordinary  income  of  about  five 
per  cent.,  the  woman  will  be  compelled  to  consume 
regularly  each  year  a  portion  of  her  principal. 
If  a  means  of  determining  definitely,  and  without 
the  possibility  of  mistake,  the  remaining  years  of 
the  supposed  woman's  life  could  be  discovered, 
there  would  be  little  difficulty  in  computing  the 
annual  allowance,  out  of  the  principal,  which 
may  be  expended  in  her  support,  without  resulting 
in  the  final  entire  loss  of  her  means  of  support. 
But  such  a  means  of  definitely  determining,  in 
advance,  the  events  of  the  future  cannot  possibly 
be  obtained;  and  the  woman  of  the  supposed 
case  (unless  the  method  which  will  be  explained 
shall  be  employed)  will  therefore  be  compelled, 
during  the  last  painful  years  of  her  life,  to  live 
in  bitter  poverty  and  economy,  looking  forward 
with  dread  and  apprehension  lest  her  small  means 
shall  be  entirely  expended  before  her  death. 

For  cases  similar  to  the  one  which  has  been 
supposed,  the  method  of  life  annuities  furnishes 
at  once  an  adequate  remedy  and  a  substantial 
relief,  notwithstanding  the  fact  that  it  will  be 
open  to  serious  theoretical  objections,  if  it  shall 
be  considered  in  the  light  of  a  regular  means  of 
investment. 

The  principles  of  the  method  of  life  annuities 
may  be  explained  in  the  following  manner: 

Life-insurance  companies  commonly  make  a 
practice  of  receiving  certain  sums  of  money  from 


34^    The  American  Business  Woman 

their  patrons,  with  agreements  to  the  effect  that 
the  companies  shall  pay  (annually,  semi-annually, 
or  quarterly)  to  the  annuitants,  during  their  lives, 
specified  sums  of  money,  and  that,  at  the  deaths 
of  the  annuitants,  the  amounts  which  they  have 
paid  to  the  companies  shall  become  the  absolute 
property  of  the  companies.  The  amounts  of 
annuities  are  determined  from  the  amounts  which 
shall  be  paid  to  the  companies,  and  from  the 
numbers  of  years  which  (according  to  the  es- 
tablished tables  of  longevity)  the  annuitants 
shall  have  yet  to  live.  In  consideration  of  the 
fact  that  the  companies  finally  obtain  absolutely 
the  principals  from  which  are  derived  the  annuities, 
the  companies  are  able  to  pay  larger  percentages 
upon  the  principals  than  may  be  obtained  in 
any  other  practical  manner. 

An  application  of  the  general  rules  of  invest- 
ment to  the  principles  of  life  annuities  will  show 
at  once  that  life  annuities  will  not  fulfil,  to  the 
satisfaction  of  investors,  the  necessary  require- 
ments of  good  investments;  moreover,  it  is  to  be 
apprehended  that  few  investors  will  consent  to 
the  sacrificing  of  principals,  and  the  consequent 
disadvantage  to  heirs  and  descendants  which 
the  system  necessarily  requires.  For  urgent  cases, 
such  as  have  been  suggested,  there  appears  to  be 
no  satisfactory  alternative,  and  the  method  of  life 
annuities  is  "^erefore  to  be  recommended. 

So  great  appears  to  be  the  public  confidence  in 


Miscellaneous  349 

the  responsibility  of  the  large  and  prosperous 
life-insurance  companies  that  certain  persons  of 
large  means  are  commonly  stated  to  have  made 
use  of  the  system  of  life  annuities  for  the  purposes 
of  direct  investment,  probably  with  a  view  to 
the  avoiding  of  the  trouble  and  difficulties 
which  generally  attend  the  ordinary  methods  of 
investment. 

When,  because  of  the  necessity  which  should 
properly  constitute  the  reason  for  the  purchasing 
of  life  annuities,  or  because  of  the  wishes  of  in- 
vestors it  shall  be  decided  to  make  use  of  the 
system  of  life  annuities,  the  one  necessary  sug- 
gestion, with  regard  to  precaution,  will  be  that 
none  but  companies  of  the  highest  reputations 
and  the  greatest  amoimts  of  capitals  and  stir- 
pluses  shall  be  dealt  with. 

The  process  of  purchasing  a  life  annuity  is 
usually  very  simple.  The  proposed  annuitant 
has  but  to  select  the  company  in  which  to  purchase 
the  annuity;  satisfy  the  officers  of  her  age  (no 
physical  examination  being  required) ;  pay  the 
amount  of  the  purchase  price;  and  receive  her 
annuity  policy  or  agreement,  stating  the  amount 
of  the  annuity  and  the  times  of  payment. 

Annuity  rates,  or  percentages  of  annuities, 
change  frequently  as  the  regular  rates  of  interest 
and  retiirns  from  investments  decrease,  the 
amounts  paid  to  annuitants  for  certain  premiums 
and   ages   becoming   less   with   each    successive 


350    The  American  Business  Woman 

change.  The  life-insurance  companies  publish 
tables  of  life  annuity  rates,  which  may  be  obtained 
upon  request  from  any  life-insurance  agent,  or 
company,  whenever  it  is  necessary  to  consider 
the  subject  particularly. 

Signing  Papers. — Warnings  against  the  care- 
less and  indiscriminate  signing  of  papers  and 
documents  have  long  ago  become  so  common 
that  an  unreasonable  tendency  towards  timidity 
in  this  respect  may  often  be  noticed  among 
inexperienced  women. 

Very  numerous  have  been  the  stories  concerning 
women  who  of  right  should  be  in  comfortable 
circumstances,  but  who,  by  the  thoughtless  and 
unintelligent  signing  of  documents,  have  ''signed 
away"  their  properties  without  proper  com- 
pensation, and  have  thus  rendered  themselves 
poor. 

Undoubtedly  such  stories  are,  in  the  majority 
of  cases,  greatly  exaggerated;  for,  in  a  general 
way,  it  may  be  said  that  the  law  will  not  allow 
persons  to  be  defrauded  of  their  properties  simply 
by  the  ignorant  signing  of  certain  legal  instru- 
ments. If  promptly  invoked,  the  principles  of 
equity  will  relieve  such  persons  from  the  conse- 
quences of  their  mistakes  in  all  cases  where  sub- 
stantial justice  shall  require  such  relief.  It 
follows  that,  in  the  majority  of  cases,  where 
property  rights  have  been  fraudulently  obtained 


Miscellaneous  351 

by  means  of  the  careless  signing  of  papers,  the 
losses  have  been  due  as  much  to  negligence  in 
bringing  the  necessary  legal  proceedings  for  the 
righting  of  the  wrongs  as  to  the  signing  of  the 
papers. 

Nevertheless,  the  thoughtless  signing  of  papers 
cannot  be  too  strongly  condemned.  There  are 
numerous  cases  in  which,  because  of  the  rights 
and  interests  of  third  parties  who  have  acted  in 
good  faith,  the  laws  may  be  powerless  to  prevent 
the  evil  and  disastrous  results  which  may  follow 
such  acts  of  thoughtlessness. 

A  perfect  practice  for  the  avoidance  of  the 
possible  dangers  at  present  under  consideration 
will  consist  of  refusals  to  sign  names  to  any  papers 
until  the  contents,  characters,  and  legal  effects 
of  the  papers  shall  be  thoroughly  understood. 
The  application  of  this  safe  and  reliable  method 
will  evidently,  in  many  cases,  require  the  exercise 
of  patience  and  labor  in  the  reading  and  under- 
standing of  long,  tedious  legal  documents.  The 
generous  disposition  to  economize  the  time  of 
others,  who  may  be  in  waiting,  also  militates 
against  the  careful  employment  of  this  practice. 
But  there  can  be  no  other  rule  in  the  premises 
which  will  entirely  answer  the  purpose.  It  must 
therefore  be  adopted  as  the  general  rule. 

Experience  will  lead  the  way  to  an  avoidance 
of  a  considerable  part  of  the  labor  of  reading  and 
understanding  documents  and  instruments  which 


35^    The  American  Business  Woman 

are  to  be  signed  by  cultivating  an  aptitude  for 
quickly  appreciating  the  gists  of  documents, 
and  for  easily  distinguishing  the  important  parts, 
which  must  be  clearly  imderstood,  from  the  unim- 
portant parts,  which  may  be  more  lightly  glanced 
at. 

There  are  many  cases  in  which  signatures  are 
to  be  used  merely  for  the  purposes  of  attestation, 
or  of  witnessing  the  signatures  of  others.  In 
such  cases,  there  will  be  no  necessity  for  under- 
standing the  characters  and  the  contents  of  the 
documents,  except  that  witnesses  should  be  sure 
of  the  purposes  of  their  signatures — that  is,  that 
their  names  are  to  be  signed  simply  as  witnesses 
to  the  execution  of  papers. 

For  this  ptirpose,  the  printed  or  written  words 
above  and  preceding  the  places  for  signatures 
in  documents  of  various  kinds,  will  often  serve  as 
sufficient  guides.  If  immediately  above  or  pre- 
ceding the  place  for  the  signature  there  shall  be 
such  words  as,  "In  witness  whereof  the  parties 
to  these  presents  have  hereunto  set  their  hands," 
or  "Signed,  New  York,  January — ,  1910,"  or 
simply  "Signed,**  the  signature  which  is  desired 
will  evidently  be  that  of  a  principal  to  the  agree- 
ment. If  the  words  above  the  place  for  the 
required  signature  shall  be  such  as  "Signed, 
sealed,  and  delivered  in  the  presence  of,"  or, 
"Sealed  and  delivered  in  the  presence  of,"  or  "In 
presence  of,"  or,  "Witness,"  the  signature  will 


Miscellaneous  353 

evidently  be  that  of  a  subscribing  witness 
only. 

The  custom  of  signing  blank  or  unfinished 
documents,  in  order  to  save  time,  and  trusting 
that  the  documents  will  be  properly  filled  out 
afterwards,  is  to  be  entirely  avoided  by  all  persons 
of  ordinary  prudence,  for  reasons  which  need  not 
be  mentioned  here. 

All  such  proceedings  as  the  signing  of  indemnity 
bonds,  the  indorsing  of  notes  for  the  accommo- 
dation of  others,  and  the  signing  of  agreements  of 
surety  for  the  purpose  of  guaranteeing  the  con- 
duct of  others  are  exceedingly  dangerous.  There 
may  be  cases  in  which  such  proceedings  cannot 
be  avoided,  but  in  such  cases  the  greatest  care 
should  be  exercised  and  ftdl  understanding  of 
the  natures  of  the  obligations  should  be  had. 
Liability  upon  such  agreements  may  endure  for 
long  periods — commonly  twenty  years — and  not 
imfrequently  the  vicissitudes  of  the  years  will  be 
easily  sufficient  to  upset  the  calculations  of  the 
shrewdest  observers. 

Powers  of  Attorney. — ^A  power  of  attorney 

is  an  instrument  which  authorizes  a  person  to 

act  as  agent  (or  attorney-in-fact,  as  distinguished 

from  attomey-at-law  or  attomey-of-record)   for 

the  person  who  shall  execute  the  power,  either 

in  a  general  manner  (in  which  case  the  power 

of  attorney  is  said  to  be  a  general  one),  or  for 
23 


354    The  American  Business  Woman 

some  particular  specified  purpose  {special  power 
of  attorney).  The  general  object  of  powers  of 
attorney  is  to  enable  agents  to  perform  certain 
acts  for  their  principals,  which  are  beyond 
the  ordinary  authorities  of  agents  (such  as  the 
execution  of  deeds),  and  which  cannot  be 
conveniently  performed  by  the  principals 
themselves. 

Although  powers  of  attorney  are  in  general 
strictly  construed  by  the  law,  the  authority 
which  is  conferred  by  them  will  be  construed 
to  be  ample  for  the  purposes  which  are  required. 
Unless  specially  limited  by  the  powers,  the  au- 
thorities of  attorneys-in-fact  will  be,  for  the 
piirposes  of  the  power,  co-extensive  with  those 
of  the  principals  themselves,  although  the  making 
of  powers  of  attorney  will  not  deprive  the  prin- 
cipals of  the  authority  to  act  for  themselves. 

The  general  principles  of  prudence  and  caution 
are,  without  doubt,  against  the  advisability  of 
executing  powers  of  attorney,  seeing  that  these 
principles  strictly  prohibit  all  imnecessary  re- 
liance upon  others.  Accordingly,  the  general 
rule  will  be  to  dispense  entirely  with  all  such 
delegations  of  authority. 

But  there  are  often  occasions  when,  by  reason 
of  sickness,  absence,  or  other  disability,  powers 
of  attorney  cannot  be  dispensed  with.  In  all 
such  cases  care  may  well  be  taken  that  the  au- 
thority which  shall  be  conferred  by  powers  of 


Miscellaneous  355 

attorney  shall  be  strictly  limited  to  the  desired 
purposes;  in  other  words,  whenever  it  shall  be 
possible,  only  the  strictest  kinds  of  special  powers 
of  attorney  should  be  executed. 

For  the  same  reasons  of  precaution,  when  powers 
of  attorney  have  been  granted  and  the  necessity 
for  them  shall  have  ceased  to  exist,  they  should 
be  at  once  annulled  by  the  filing  or  recording 
of  revocations  in  the  proper  public  offices  of  record. 
That  revocations  of  powers  of  attorney  shall  be 
promptly  placed  on  record  in  the  proper  offices 
is  especially  important,  because  of  the  fact  that, 
although  the  powers  may  have  been  properly 
and  legally  revoked,  as  between  principals  and 
attorneys,  the  principals  will  still  be  bound  to 
other  parties,  who  shall  have  no  knowledge  of 
the  revocations,  by  the  unauthorized  acts  of  the 
attorneys-in-fact,  and  the  placing  upon  record  of 
the  revocations  is  declared  by  law  to  be  con- 
structive notice  to  all  persons. 

Advisers  in  Business  Matters. — ^The  best 
rule,  concerning  advisers  in  matters  of  business, 
which  can  be  devised,  is  that  investors  shall  be 
their  own  advisers;  which  rule  will  permit  of 
the  fulfilling  of  another  valuable  rule — that  in- 
vestors shall  keep  their  business  affairs  strictly 
to  themselves.  But  the  first-mentioned  rule 
evidently  presupposes  a  certain  degree  of  business 
education  and  ability  on  the  parts  of  investors, 


35^    The  American  Business  Woman 

which,  in  fact,  will  not  be  possessed  by  every 
owner  of  property. 

The  rule  with  regard  to  advisers  in  business 
matters  which  will  best  suit  investors  who  shall 
not  possess  the  necessary  business  abilities  may 
be  stated  in  this  manner : 

Investors  must  make  it  their  serious  business 
to  aquire  the  necessary  business  educations  and 
abilities,  seeking  in  the  meantime  only,  and  when 
such  action  shall  be  unavoidable,  the  advice  of 
others  who  shall  be  honest,  experienced,  and 
successful. 

For  the  purpose  of  aiding  in  the  selection  of 
such  advisers,  the  following  suggestions  may  be 
offered : 

Those  whose  advice  concerning  the  investment 
of  property  shall  be  sought  must  themselves  be 
actual  investors.  For,  evidently,  successful  manu- 
facturers, farmers,  business  men,  or  professional 
men  may  be  not  at  all  familiar  with  the  subject 
of  investments.  And  the  suggestion  may  be 
further  amplified  by  the  requirement  that  ad- 
visers shall  be  successful  in  the  precise  kind  of 
investments  concerning  which  their  advice  may 
be  required.  Investors  differ  materially  in  their 
preferences  and  practices.  Thus,  certain  in- 
vestors will  invest  their  means  only  in  piirchases 
of  real  estate;  others  may  prefer  to  own  no  real 
estate  at  all;  and  of  the  latter  class,  one  investor 
may  invest  entirely  in  mortgages,  while  another 


^  Miscellaneous  357 

may  be  a  firm  believer  in  bonds  and  other  forms 
of  personal  securities.  Each  may  be  experienced, 
sagacious,  and  successful  in  his  own  particular 
line  of  investment,  and  inexperienced  or  un- 
successful with  other  kinds  of  investment. 

A  general  rule  may  be  that  advisers,  in  addition 
to  the  possession  of  the  qualities  which  have  been 
mentioned,  must  be  without  direct  personal 
interest  in  the  particular  matters  upon  which 
their  advice  shall  be  sought — or,  perhaps  more 
accurately,  that  the  conditions  of  advisers  must 
continue  to  be  the  same  whatever  shall  be  the 
final  determinations  of  the  inquiring  investors. 
And  this  rule  will  evidently  prohibit  direct  busi- 
ness transactions  with  advisers  unless  it  be  to 
pay  them  for  their  services  certain  amounts  which 
shall  not  be  dependent  upon  the  final  acceptance 
of  their  suggestions. 

Another  suggestion,  with  regard  to  advisers 
in  matters  of  business,  may  be  that  investors  who 
shall  not  yet  have  attained  the  desired  conditions 
which  will  enable  them  to  act  as  their  own  ad- 
visers shall  compare  the  advice  which  may  be 
given  them  with  the  general  methods  and  prac- 
tices of  the  advisers,  or  with  the  special  conduct 
of  advisers  in  cases  which  are  similar  to  the 
particular  ones  concerning  which  the  advice  has 
been  given.  If  an  adviser  shall  recommend 
certain  courses  of  action  which  shall  be  plainly 
contrary  to  those  which  have  been  pursued  by 


358    The  American  Business  Woman 

the  adviser  under  similar  conditions,  the  doubts 
of  the  seeker  after  advice  may  well  be  excited. 

Finally,  it  may  be  remarked  (by  way  of  repeat- 
ing a  suggestion,  the  importance  of  which  will 
warrant  the  repetition)  that  investors  must  strive 
without  ceasing  to  fulfil  speedily  the  conditions 
which  will  permit  of  the  dispensing  with  all 
advice  from  others  concerning  their  methods  of 
investment,  realizing  clearly  the  fact  that  the 
sooner  they  shall  be  able  to  fulfil  the  required  con- 
ditions, the  sooner  will  they  be  removed  from 
positions  which  may,  and  perhaps  in  the  majority 
of  cases  will,  lead  to  the  making  of  bad  in- 
vestments and  to  consequent  difficulties  and  loss 
of  property. 


Letters  of  Credit. — A  letter  of  credit  is  a 
letter  by  which  a  person  (or  corporation)  agrees 
to  repay  money  or  credit  given  to  a  second  per- 
son by  a  third  person.  It  is  general,  when  di- 
rected to  any  person  to  whom  it  may  be  pre- 
sented, or  special,  when  directed  to  a  certain 
person,  or  corporation. 

The  form  of  a  general  letter  of  credit  may  be  as 
follows: 


We  hereby  agree  to  guarantee  to  any  person 
advancing  money  or  selling  goods  to  A.  B.  of 
New  York  City,  N.  Y.,  not  exceeding  the  sum 


Miscellaneous  359 

of  $ ,  the  repayment  thereof  at  the  expiration 

of  the  credit  which  shall  be  given. 

(Date.) 

To  C.   D.,  etc.  (Signature). 

The  form  of  a  special  letter  of  credit  may  be  as 
follows : 

To  Messrs.  A.  B.,  London,  Eng.; 

Gentlemen:  We  hereby  agree  to  he  respon- 
sible for  goods  sold  or  money  advanced  by  you 
to  C.  D.  of  New  York  City,  N.  Y.,  to  an  aggregate 
amount  not  exceeding  $ . 

(Date.)  (Signattire.) 

Letters  of  credit  which  are  sold  by  the  banks 
and  directed  to  their  correspondents  at  various 
points  in  foreign  countries  (sometimes  called 
circular  notes)  are  extensively  used  by  travellers, 
the  object  being  to  provide  them  with  funds 
at  different  points  of  travel,  thus  avoiding  the 
necessity  of  carrying  larger  sums  of  money  with 
them,  and  also  avoiding  the  difficulty  of  ex- 
changing funds  into  the  moneys  of  the  different 
countries  that  may  be  visited. 

Bills  of  Exchange  and  Promissory  Notes. — 
In  another  part  of  this  work,  a  general  suggestion 
concerning  the  avoidance  of  all  obligations  of  the 
nature  of  bills  of  exchange  and  promissory  notes 
has  been  made  And,  although  it  is  greatly  to 
be  desired  that  those  for  whose  benefit  and  in- 


36o    The  American  Business  Woman 

stniction  this  work  has  been  written  shall  be 
able  at  all  times  to  accept  the  suggestion  which 
has  been  mentioned,  and  to  dispense  entirely 
with  the  accepting,  signing,  and  indorsing  of 
such  obligations,  nevertheless  it  is  deemed  to  be 
necessary  that  the  subjects  of  bills  of  exchange 
and  promissory  notes  shall  receive  at  least  general 
explanations  here. 

A  bill  of  exchange  is  a  written  order,  made  by 
one  party  (the  drawer)  to  a  second  party  (the 
drawee)  directing  the  second  party  to  pay  to  a 
third  party  (the  payee)  a  certain  specified  sum 
of  money  at  a  certain  specified  time. 

K  foreign  bill  of  exchange  is  one  the  drawer  and 
drawee  of  which  reside  in  different  coimtries,  or 
in  different  States  of  the  United  States. 

An  inland  bill  of  exchange  is  one  the  drawer 
and  drawee  of  which  reside  in  the  same  country, 
or  in  the  same  State  of  the  United  States. 

The  explanations  and  suggestions  which  are 
contained  in  Chapter  II.  of  this  work  concerning 
indorsements,  dishonoring,  protest,  etc.,  apply 
in  all  respects  (with  such  modifications  as  the 
evident  differences  between  bank  checks,  bills 
of  exchange  and  promissory  notes  will  suggest) 
to  bills  of  exchange  and  promissory  notes. 

Bills  of  exchange  may  be  made  payable  either 
at  sight  (on  presentation  to  the  drawees)  or  at 
specified  times,  which  are  later  than  their  dates 
(as  *' thirty  days  after  date,"  "sixty  days  after 


Miscellaneous  361 

sight,"  or,  '*on  the  first  day  of  June,  1910"). 
In  either  case,  bills  of  exchange  must  be  presented 
to  the  drawees  for  payment  upon  the  days  of  their 
maturities;  in  the  latter  case,  they  must  be  pre- 
sented to  the  drawees  as  soon  as  such  presentations 
shall  be  possible  for  acceptance,  or  the  writing 
across  the  faces  or  backs  of  the  bills  by  the  drawees 
of  the  word  '  'Accepted, "  their  signatures,  and  the 
dates  of  the  acceptances,  the  drawees  then  be- 
coming the  acceptors. 

The  usual  form  of  a  bill  of  exchange  is  as 
follows: 

Boston,  Feb.  i,  19 10. 
At  sight  (or  days  after  sight,  or        days 

after  date,  or  on  the  day  of  »  19  )  pay  to 
the  order  of  John  Doe  one  thousand  3%  dollars 
and  charge  the  same  to  the  accoimt  of 

Richard  Roe. 
$iooo.AV 

To  Mr.  William  White, 

124  Narrow  St.,  New  York  City. 

Such  a  bill  of  exchange  is  said  to  be  negotiable 
because,  being  made  payable  to  the  order  of  the 
payee,  it  may  be  transferred  by  him  to  others 
(and  by  them  to  third  parties,  and  so  on)  by 
indorsement.  If  a  bill  of  exchange  is  made 
payable  to  the  payee  personally,  the  words  "the 
order  of"  before  the  payee's  name,  being  omitted, 
the  bill  will  be  non-negotiable. 


362    The  American  Business  Woman 

The  general  reasons  for  and  the  purposes  of 
bills  of  exchange  may  be  indicated  by  an  example 
in  the  following  manner: 

Suppose  that  John  Doe,  of  No.  10  North  East 
Street,  Chicago,  is  indebted  to  Richard  Roe  of 
Boston  in  the  sum  of  one  thousand  dollars,  and 
that  Richard  Roe  is  indebted  to  William  White 
in  the  same  amount.  If  the  two  debtors  shall 
be  able  to  pay  their  debts,  the  regular  and  sim- 
plest method  of  doing  so  will  be  the  sending  of 
properly  drawn  checks  by  the  debtors  inde- 
pendently to  their  creditors.  But,  suppose  that 
Richard  Roe  shall  be  imable  to  pay  his  debt  to 
William  White,  unless  he  shall  first  collect  the 
amount  which  is  due  to  him  from  John  Doe ;  that 
Roe's  creditor  shall  be  pressing  in  his  demands 
for  the  payment  of  the  debt ;  that  Doe,  being  sure 
of  receiving  sufficient  funds  for  the  payment  of 
his  debt  to  Roe  within  sixty  days,  shall  agree  to 
accept  a  bill  of  exchange  drawn  by  Roe  (or  that 
Roe  shall  decide  to  draw  upon  Doe  for  the  amount 
of  the  debt,  trusting  that,  rather  than  have  his 
paper  protested.  Doe  will  accept  and  pay  the 
bill  of  exchange);  and  that  White  shall  agree  to 
receive  and  collect  the  bill  of  exchange.  In  this 
case  the  bill  of  exchange  will  be  as  follows : 


Boston,  Feb.  i,  19 10. 
Sixty  days  after  date  pay  to  the  order  of  William 


Miscellaneous  363 

White  one  thousand  tVV  dollars  and  charge  the 
same  to  the  account  of 

Richard  Roe. 
liooo.AV 

To  Mr.  John  Doe, 

10  North  East  Street,  Chicago,  111. 

If  the  bill  of  exchange  shall  be  properly  ac- 
cepted by  Doe,  and  paid  by  him  at  maturity, 
the  result  of  the  transaction  will  be  the  discharging 
of  the  two  debts  (Doe  to  Roe  and  Roe  to  White) 
by  the  payment  of  the  single  bill  of  exchange. 
In  other  words,  the  two  debts  will  have  been 
exchanged. 

From  the  understanding  of  the  subject  of  bills 
of  exchange,  which  should  now  be  sufficiently 
clear,  it  will  be  evident  that  such  methods  will 
often  be  practically  unavoidable  to  men  who  are 
actively  engaged  in  certain  regular  businesses. 
It  will  be  equally  evident  that  occasions  upon 
which  the  obligations  and  collections  of  investors 
may  not  be  capable  of  arrangement  by  means 
of  ordinary  bank  checks  should  seldom,  if  ever, 
arise. 

A  promissory  note  (or  commonly  a  "note") 
is  a  written  promise  on  the  part  of  the  drawer  or 
maker  to  pay  to  the  order  of  the  payee  (by  name) 
a  specified  amount  of  money  at  a  specified  time. 
The  usual  form  of  a  promissory  note  is  as 
follows : 


364    The  American  Business  Woman 

New  York,  Feb.  i,  1910. 

On    demand    (or        days    after    date,    or 
months  after  date,  or  on  the        day  of         >  19     ) 
I  promise  to  pay  to  the  order  of  John  Doe,  one 
thousand  -f^^  dollars  (with  interest)  for  value  re- 
ceived. 

Richard  Doe. 

$iooo-TT5ir- 

Sometimes  promissory  notes  specify  also  the 
places  of  payment, — for  example,  after  the  words 
*' order  of  John  Doe,"  in  the  above  form,  may  be 
inserted  the  words  "at  No.  100  Narrow  St.,  New 
York  City,"  or  "at  the  Twentieth  National 
Bank  of  Boston." 

The  principal  purposes  for  the  making  of  promis- 
sory notes  are:  on  the  parts  of  the  makers,  the 
borrowing  of  money  and  the  postponing  of  the 
payment  of  debts  until  such  times  as  shall  be 
more  convenient;  on  the  parts  of  the  payees, 
the  obtaining  of  written  evidences  of  debts,  the 
obtaining  of  money  by  means  of  the  discounting 
of  the  notes,  and  the  obtaining  of  obligations 
which,  although  the  makers  may  be  irresponsible 
persons,  may  be  paid  in  order  to  avoid  the  dis- 
advantages which  may  result  from  the  dis- 
honoring and  protesting  of  the  notes. 

Concerning  the  purposes  of  the  makers  of 
promissory  notes,  it  may  be  said  that  they  should 
have  no  application  to  regular  and  careful  in- 
vestors; a  more  dangerous  practice  than  the  fre- 


Miscellaneous  365 

quent  signing  and  indorsing  of  notes  can  scarcely 
be  mentioned.  It  is  responsible  for  number- 
less and  immense  losses  of  property.  Investors 
should  therefore  adopt  an  invariable  rule  to  the 
effect  that  they  will  never  sign  or  indorse  promis- 
sory notes  except  when  extraordinary  circum- 
stances shall  render  it  necessary  for  them  to  do 
so.  And  if  such  unfortunate  circumstances  shall 
arise,  investors  must  consider  the  probabilities 
that  they  will  finally  be  compelled  to  pay  notes 
which  they  have  signed  or  indorsed  as  actual 
facts,  and,  by  making  careful  memoranda  of  the 
amounts,  dates,  other  signers'  and  indorsers* 
names,  etc.,  and  by  arranging  their  affairs  ac- 
cordingly, they  must  be  fully  prepared  to 
meet  the  obligations  when  they  shall  become 
due. 

With  regard  to  the  purposes  for  which  in- 
vestors shall  receive  promissory  notes  from  others, 
it  may  be  remarked  that  in  the  majority  of  cases 
they  will  prove  not  to  be  practical,  because  of  the 
irresponsibility  and  dishonesty  of  the  makers  and 
indorsers.  It  is  doubtless  very  generally  true 
that  persons  who  will  not  pay  their  honest  and 
lawful  ordinary  debts,  will  not  pay  the  promissory 
notes  upon  which  they  shall  be  legally  liable.  It 
is  evident  that,  if  an  investor  shall  discount  a 
worthless  note  upon  which  he  is  the  payee,  the 
transaction  will  result  in  the  payment  of  the  note 
upon  its  maturity  by  the  investor,  and  in  the 


366    The  American  Business  Woman 

consequent  loss   of  the   discoiint,   interest,   and 
perhaps  protest  fees. 

The  practical  rule  with  regard  to  the  receiving 
of  promissory  notes  by  investors,  therefore, 
appears  to  be  that  there  are  but  two  classes  of 
cases  in  which  notes  will  be  of  any  service  what- 
ever; first,  the  class  of  cases  in  which  there  shall 
be  no  reasonable  doubts  concerning  the  ample 
responsibilities  of  the  makers  or  indorsers;  and 
second,  the  class  in  which  the  debts  for  which  the 
notes  shall  be  given  will  be  difficult  to  establish 
in  legal  proceedings,  and  the  notes  may  therefore 
be  valuable  as  evidences  of  the  debts,  and  for 
the  purpose  of  otherwise  simplifying  and  making 
more  effective  necessary  proceedings  at  law. 


INDEX 


Ability  to  estimate  incomes,  8 
Acceptance,  361 
Acceptor,  361 
Accommodation  indorsements, 

38 
Accounts 

Of  incomes  and  expenditures 

5;  Of  rents,  289 
Actual  amounts  of  mortgages, 

159 

Actual  securities,  107 

Adage  of  the  fool,  i 

Administration,  letters  of,  329 

Administration  of  estates,  327 

Administrators 

Accounting,  335;  and  execu- 
tors, 328;  Appointment  of 
328 ;  Assistance  of  the  courts, 
334 ;  Bonds  of,  298 ;  Collection 
of  assets,  331;  Discharge  of, 
335;  Duties  .of,  327;  Invent- 
ories, 332;  Legal  advice,  334; 
Number  of,  320;  Payment 
of  debts,  333 ;  Powers  of,  333 ; 
Take  personal  property,  328 

Adverse  possession,  207 

Advisers  in  business  matters, 

355 
Agencies,  mercantile,  272 
Agents,  insurance,  246 
Agents,  real  estate,  250 
Agreements  between  joint  own- 
ers, 228 
Alienation  of  property,  306 
Alterations  in  real  estate,  241 
Ample  securities,  100 
Annuities,  346 
Anxiety  to  sell  real  estate,  214 


Assignment  of  mortgages,   166 
Assistance  of  the  courts,  334 
Associations,  building  loan,  198 
Attorney,  powers  of,  353 
Attorneys  at  law,  and  in  fact, 

353 
Auction  sales,  215 
Avarice  as  to  rents,  232 
Avaricious  investors,  112 


B 


Balancing 

Of  bank-books,  56;  Of  check- 
books, 58 ;  Of  pass-books,  74 

Bank-account,  13 

Making  deposits,  43 ;  Opening 
a,  20;  Overdrawing,  30;  Re- 
duction of  balance,  19;  Value 
of,  13 

Bank-book,  21 

Bank  checks,  22 

Cashiers'  checks,  34;  Certi- 
fication, 33;  Charged  against 
depositors,  66;  Credit  of,  33; 
Destruction  of ,  41;  Die  with 
their  makers,  43 ;  Dishonoring 
of,  42 ;  Drawer  or  maker,  23 ; 
Forgeries  of,  29;  Form  of,  23; 
How  drawn,  23;  How  indor- 
sed, 38;  Illustrations  of,  24; 
Indorsee  and  indorser,  23; 
Loss  of,  41;  Memorandum, 
29 ;  Not  good  or  no  account, 
42;  Payable  to  bearer,  23; 
Payable  to  cash,  23;  Payee, 
23 ;  Prompt  depositing  of,  56; 
Protest  of,  42;  Raising  of, 
29;  Vouchers,  57 

Bank-notes,  14 


367 


368 


Index 


Bank  officers  and  clerks,  20 

Banks,  13 

Capitals  of,  16;  Deposit 
ticket,  44;  Discounting  of 
notes,  17 ;  Distinguished  from 
savings  banks,  14;  In  small 
cities  and  villages,  1 7 ;  Kinds 
of,  14;  National,  14;  Officers 
of,  20;  Private  or  individual, 
14;  Signatures  at  21;  State, 
14;  Statements  of,  18;  Sur- 
pluses, 17 

Bargain  and  sale  deed,  183 

Bequest,  296 

Bills  of  exchange,  359 

Bond  and  mortgage,  139 

Bonds,  122 
And  stocks,  121;  Condition, 
163;  County,  124;  Cove- 
nants, 163;  Government, 
123;  Of  cities,  124;  Penalty, 
163;  Railroad,  132;  Real 
estate,  163;  State,  124;  To 
secure  improvements,  276; 
United  States,  123 

Bondsman,    responsibility   of, 
156 

Builders,  224 

Builders'  loans,  149 

Building  Loan  Associations,  198 
Buildings 

Arrangement  of,  224;  Con- 
struction of,  223;  Insurance 
of,  244 

C 

Capital  stock,  128 

Cashiers'  checks,  34 

Certificates  of  deposit,  86 

Certified  checks,  33 

Characteristic  signatures,  21 

Chattel  mortgages,  175 

Check-books,  44 

Balancing  of,  58;  Memo- 
randain,56;  Private  balances 
in,  54;  Valuable  account- 
books,  14;  Valuable  referen- 
ces, 14 


Checks,  see  Bank  Checks,  22 
Checks    of    trust    companies, 

87    . 
Christian  names,  21 
Circular  notes,  359 
Cities,  increase  of  population, 

226 
City  and  country  homes,  195 
Civil  damage  acts,  286 
Codicils,  296 
Collection  of  assets,  331 
Collection  of  rents,  267 
Commissions,  250 
Common  stock,  129 
Companies,  see  Corporations, 

127 
Comparative  values,  150 
Complicated  schemes,  116 
Conclusion  in  a  deed,  183 
Condemnation  of  real  property, 

204 
Condition  in  a  bond,  163 
Condition  in  a  deed,  183 
Condition  of  buildings,  239 
Conditions  for  safety  of  mort- 
gages, 141 
Conditions  for  success  of  wills, 

299 
Considerations  affecting  mort- 
gages, 143 
Considerations  concerning   in- 
vestments, 99 
Construction  of  buildings,  223 
Contesting  of  wills,  312 
Contracts  for  property,  2 19 
Control  of  securities,  106 
Conveyance,  deed  of,  182 
Conveyance,  title  by,  181 
Co-operative  loan  associations, 

198 
Corporations,  127 

Bonds  of,  130;  Capital  stock 
of,  129;  Formation  of,  128; 
Investment,  133;  Land,  133; 
Legal  restraint  of ,  127 ;  Loan, 
198;  Trusts,  128;  Value  of, 
127 
Country  homes,  195 


Index 


369 


Covenants 

In  bonds,  163;  In  deeds,  184; 
In  ground  leases,  281;  In 
leases,    256;    In   mortgages, 

165 

Credit  of  a  bank  check,  31 
Credit  of  a  certified  check,  33 
Curtesy,  estate  by,  179 


Danger  of  dealing  in  stocks,  131 

Danger  of  speculation,  96 

Decrease  of  incomes,  4 

Decrease  of  interest,  3 

Deed 

Bargain  and  sale,  183;  Cove- 
nants, 184;  Full  covenant, 
183;  Parts  of  a,  182;  Quit- 
claim, 183 

Deeds,  kinds  of,  183 

Delinquent  taxes,  238 

Deposits 

In  banks,  43;  In  savings 
banks,  71;  In  trust  com- 
panies, 85;  Special  or  time, 

^9 

Deposit  tickets,  44 
Depression,  periods  of,  214 
Descent,  295 

Heirs,  295;  Intestates,  295; 
Title  by,  181 
Devise,  296 
Devise,  title  by,  181 
Devisee  and  devisor,  296 
Disabilities  of  married  women, 

336 
Discharge  of  mortgages,  167 
Discounting  of  notes,  17 
Discrimination    against    non- 
residents, 207 
Dishonoring  of  checks,  42 
Disposition  to  save  money,  2 
Dissolute  children,  304 
Distribution,  294 

Administrators,    328;    Next 
of  kin,  295 
Division  of  real  estate.  228 


Divorce,  340 
Dower,  estate  in, 

£ 


179 


Eminent  domain,  206 
Entail,  305 

Equity  of  redemption,  138 
Erroneous  indorsements,  40 
Estate,  guardian  of  the,  316 
Estates  in  land,  178 
Estates,  merger  of,  180 
Estimates  of  income,  8 
Evenness  of  income,  7 
Examination  of  titles,  145 
Exception  to  rules  of  invest- 
ment, 123 
Exchange,  bills  of,  359 
Exchanges  of  real  estate,  212 
Executors,  see  Administrators 
Expenditures,  2 

By  tenants,  274;  Upon  real 
estate,  233 
Expense  account,  5 
Extension  of  leases,  278 
Extension  of  mortgages,  170 


Fair  and  regular  incomes,  109 
Family,  status  of,  304 
Fee,  estates  in,  179 
Fee-leaseholds,  278 
Fictitious  securities,  107 
Financial  responsibility,  271 
Fire  clause  in  leases,  259 
Fire  insurance,  244 

Agents,  246;  Builders'  risks, 
248;  How  invalidated,  249; 
Lightning  clause,  248 ;  Mort- 
gagee   clause,     155;    Other 
insurance,  248;  Renewal  of, 
248;  Risks,  245 
First  and  second  mortgages,  139 
Fluctuations  in  values,  160 
Foreclosure  of  mortgages,  168 
Forgery,  31 
Formation  of  corporations,  128 


370 


Index 


Forms 

Of    bank    checks,     24;   Of 
indorsements,  35;   Of  receipts, 

172 
Fraudulent       alteration      of 

checks,     28 
Free  and  clear  homes,  197 
Full  covenant  deeds,  183 
Fundamental  rule,  2 


General  classes  of  investments. 

General    principles  of   invest- 
ment, 94 

General  rule  as  to  deposits  in 
savings  banks,  73 

Gold  the  money  standard,  118 

Government  bonds,  123 

Grasping  investors,  112 

Ground  leases,  277 

Advantages  of,  280;  Cove- 
nants in,  28 1 ;  Improvements, 
279 ;  Percentage  of  rents,  279 ; 
Perpetual,  278  • 

Guaranteed  stock,  129 

Guardians,  324 

Appointment  of,  316;  Duties 
of,  324;  Natural,  315;  Of  the 
person  and  estate,  316; 
Qualifications  of  324;  Testa- 
mentary, 297 


H 


Habendum  in  a  deed,  182 

Highest  types  of  investment, 
186 

Home,  the  perfect,  201 

Homes 

As  investments,  1 89 ;  City  and 
country,  195;  Classes  of,  194; 
Free  and  clear,  197;  How  ob- 
tained, 201 ;  Location  of,  195; 
Moderate,  195;  Of  working 
men,  191 ;  Ownership  of,  189; 
Rural,  194;  Safe  cost  of,  195; 


Selection  of,  193;  Simple,  I94 
Homestead  Acts,  197 

I 

Ignorance  of  women,  vii 

Improved  and  unimproved  real 
estate,  221 

Improvement  of  real  estate,  223 

Improvements  by  tenants,  274 

Income 

And  expenditure,  2;  Defini- 
tions of,  9;  Distinguished 
from  principal,  9 

Income  account,  5 

Incomes 

Certainty  of,  109;  Estimates 
of,  8;  Evenness  of,  7;  Fair 
and  regular,  109;  From  real 
estate,  232 ;  Percentages  of, 
3 ;  Rule  to  live  within,  2 

Increase  in  values,  210 

Indebtedness  of  nations,  121 

Indentures,  255 

Individual  banks,  14 

Indorsee  and  indorser,  23 

Indorsement,  35 

Indorsements 

Accommodation,  38;  In 
blank,  36;  In  full,  35; 
Methods  of,  38;  Qualified, 
36;  Restrictive,  37;  Wrongly 
written,  40 

Inheritance  tax,  322 

Insurance,  see  Fire  Insurance 

Interest 

Bearing  stock,  129;  Cove- 
nant to  pay,  1 63 ;  Decrease  of, 
3;  In  savings  banks,  76;  In 
trust  companies,  88;  Usuri- 
ous, 114 

Interests  in  lands,  178 

Intervening  estate,  180 

Intestate,  295 

Inventories  of  executors,  332 

Investment 

Corporations,  133;  Distin- 
guished from  speculation, 
94;  General  principles  of,  94; 


Index 


371 


Investment — ( Contin  ued) 
Highest  types  of,  186;  Of 
funds  of  banks,  18;  Of  funds 
of  savings  banks,  69;  Of 
funds  of  trust  companies,  84; 
Simple  theory  of,  117 

Investments 

Considerations  concerning, 
.  99;  Distribution  of,  9;  Gen- 
eral classes  of ,  98 ;  Homes  as, 
189;  Joint,  108;  Loan,  98; 
Permanent,  94;  Purchase, 
98;  Safety  of,  99;  Tem- 
porary,   94 


Joint 
•Investments,    108;    Owner- 
ship   of    real    estate,     228; 
Tenancy,  181 


Kinds 

Of  banks,  14;  Of  deeds,  183; 
Of  homes,  194;  Of  invest- 
ments, 98 


Land,  see  Real  Property,  178 
Equity  in,  139;  Estates  in, 
178;  Possession,  of  185;  Title 
to,  181 

Landlord  and  tenant,  255 
Agents,  250;  Civil  damage 
acts,  286;  Collection  of  rents, 
267;  Commissions,  250; 
Ground  leases,  277;  Illicit 
uses,  284;  Kinds  of  business, 
286;  Leases,  255;  Mercantile 
agencies,  272;  Precautions 
against  fire,  286;  Rent  ac- 
counts, 289;  Repairs,  239; 
Security,  67;  •  Strength  of 
buildings,  287;  Sureties, 
270;  Surety  companies,  273; 
Taxes,  233;  Wear  and  tear, 
286 


Large  cities,  real  property  in, 
150 

Last  will  and  testament,  295 

Laws 

Against  perpetuity,  306; 
Concerning  investments, 
105;  married  women,  336; 
mortgages,  146;  non-resi- 
dents, 207;  taxes,  237;  usury 
114;  Governing  banks,  15; 
safe  deposit  companies,  90; 
savings  banks,  68;  trust 
companies,  83 

Leases,  see  Landlord  and  Ten- 
ant, 255 

Clauses  of,  256;  Long  and 
short,  263;  Monthly,  263; 
Options  in,  266;  Special 
agreements,  262 

Legacy,  296 

Legacy  tax,  322 

Legal  advice  to  executors,  etc., 

334 
Legal  age,  309 
Legal  separation,  341 
Legislation    against  non-resi- 
dents, 207 
Letters  of  administration,  329 
Letters  of  credit,  358 
Letters  testamentary,  329 
Lien  of  a  mortgage,  137 
Life  estate,  179 
Life  insurance,  342 
Litigation  over  wills,  312 
Loan  corporations,  198 
Loan  investments,  98     / 
Loans  on  chattels,  174 
Locality 

Effect  upon  mortgages,  150; 

Of    homes,     195;    Of    real 

estate,  227 
Long-continued  accounts,  77 
Long-established      savings 

banks,  69 
Long-possessed     real     estate, 

202 
Loss  of  bank  check,  41 
Loss  of  pass-book,  72 


372 


Index 


M 

Maker  or  drawer,  23 

Management     of    estates    of 
wards,  325 

Managing  owners,  229 

Margin  of  safety,  100 

Future  or  prospective,  208; 
Magnitude  of,  104;  Present, 
208 

Marriage,  effect  of,  upon  wills, 
322 

Married  women,  336 

Married   women,    suggestions 
to,  341 

Memoranda  for  wills,  300 

Memoranda  in  check-books,  56 

Memorandum  checks,  29 

Mercantile  agencies,  272 

Merger  of  estates,  180 

Miscellaneous,  336 

Money,  118 

Disposition  to  save,  2 ;  Value 
of,  I 

Monthly  tenants,  263 

Mortgage,  137 

A  perfect  loan  investment, 
142 ;  Bond  accompanying, 
156;  Form  of,  137;  Note 
accompanying,  139 

Mortgagee,  137 

Mortgagee  clause,  155 

Mortgages 

Actual  values,  146;  Amounts 
of,  159;  Assignment  of,  166; 
Builders'  loans,  149;  Con- 
siderations affecting,  143; 
Covenants  in,  165;  Debt  and 
lien,  138;  Equity  of  redemp- 
tion, 139;  Extension  of ,  170; 
First  and  second,  139;  Fore- 
closure, 168;  How  destroyed, 
167;  Improved  and  unim- 
proved land,  151;  Increasing 
proportions  of,  159;  Insur- 
ance, 154;  Interest,  147; 
Laws  affecting,  146;  Legal 
precautions,      160;      Lenity 


toward  mortgagors,  158; 
Locality,  150;  Margin  of 
safety,  158;  Mortgage- 
clause,  155;  Note  accom- 
panying, 139;  On  chattels, 
174;  On  timber  and  mineral 
lands,  150;  Paid  in  install- 
ments, 173;  Payment  of, 
168;  Precedence  of,  140; 
Principles  of  investment, 
141;  Proportions  of,  159; 
Purchase  money,  140;  Re- 
ceipts for  interest,  171;  Re- 
cording of,  161;  Responsi- 
bility of  bondsmen,  156; 
Safety  of,  141;  Satisfaction 
of,  168;  Stability  of  values, 
160;  Titles  to  lands,  143;  To 
secure  future  advances,  149 

Mortgagors,  137 

Mortgagors,  orderly  dealings 
with,   171 

Mutual  loan  associations,  198 


N 


National  banks,  14 
Necessary  securities,  109 
Next  of  kin,  295 
Non-residents,  207 
Notes    accompanying     mort- 
gages   139 
Notes  and  bills,  359 
Number  of  executors,  320 


Obligee  and  obligor,  163 
Occupation,  title  by,  181 
Options  in  leases,  266 
Orderly  dealings    with  mort- 
gagors, 171 
Overdrawing  accounts,  30 
Ownership  of  land,  185 

Complications,     228;     Pur- 
poses of,  188 


Index 


373 


Panics  in  savings  banks,  77 
Paper  money,  118 
Papers,  signing  of,  350 
Partition  of  real  estate,  230 
Partnership  investments,  109 
Parts  of  a  deed,  182 
Pass-book  at  savings  bank,  71 
Password  at  safe  deposit  com- 
pany, 91 
Payee,  23 

Payment  of  bills,  56 
Payment  of  mortgages,  167 
Payments  by  executors,  333 
Penalties  on  delinquent  taxes, 

238 
Penalty  of  a  bond,  163 
Periods  of  depression,  213 
Permanent  investments,  94 
Perpetual  leases,  278 
Perpetuity,  laws  against,  306 
Personal  property ,  loans  on,  1 75 
Powers  of  attorney,  353 
Preferred  stock,  129 
Premises  in  a  deed,  182 
Primogeniture,  305 
Principal 
And  income,  9;  Covenant  to 
pay,   166;  Definition  of,  9; 
Distribution  of,  9 
Principles  of  investment,  94 
Private    balances     in    check- 
books, 55 
Private  banks,  15 
Probate  of  wills,  329 
Problems  of  the  ages,  2 
Promissory  notes,  359 
Proper  sense  of  security,  107 
Property 
Alienation  of,  306;  Concen- 
tration   of,    305;    Contract 
for,  219;    Descent  of,    294; 
Distribution   of,    294;    Per- 
sonal, 174;  Possession  of,  i; 
Real,  178;  Value  of,  i 
Proportions  of  mortgages,  159 
Pr/^test,  42 


Public 

Expenditures,  235;   Indebt- 
edness, 121;  Securities,  122 

Purchase  investments,  98 

Purchase-money      mortgages, 
140 

Purchasing  of  real  estate,  202 


Q 


Qualifications  of  executors  315 
Qualifications     of    guardians, 

315 

Qualified  indorsements,  36 
Qualities  of  securities,  100 
Qualities  of  signatures,  2i 
Quit-claim  deeds,  183 


Railroad  bonds,  131 

Rates 

Of  commissions,  253;  Of  fire 
insurance,  245 ;  Of  interest,  3 

Real  and  ample  securities,  100 

Real  estate,  see  Real  Property, 
178 

Real-estate  bond,  156     '' 

Real    property,  178 

Advantages  of,  185;  Adverse 
possession,  207;  Agents,  250; 
Alterations,  241 ;  Anxiety  to 
sell,  214;  As  an  investment, 
202;  Auction  sales,  215; 
Builders,  224;  Commissions, 
250;  Complications  by  de- 
scent, 228 ;  Condemnation  of, 
204;  Contract  for  property, 
219;  Deeds,  182;  Difficulties 
in  purchasing,  202 ;  Division 
of,  228;  Eminent  domain, 
205 ;  Estates  in  land,  1 78 ;  Ex- 
changing, 212;  Expenditures, 
233;  Further  assurance,  184; 
Future  of,  210;  Improved 
and  unimproved,  221;  Im- 
provement of,  223;  Incomes 
from,  232 ;  Increase  in  values. 


374 


Index 


Real  property — (Continued) 
210;  Insurance,  244;  Invest- 
ments and  speculations,  222; 
Joint  ownership  of,  228; 
Long  possessed,  203 ;  Manag- 
ing owners,  229;  Margin  of 
safety,  208;  Ownership  of, 
1 85 ;  Partition  of  230;  Periods 
of  depression,  212;  Purchas- 
ing of,  202;  Purposes  of 
ownership,  188;  Quiet 
enjoyment  184;  Repairs, 
239;  Returns  from, 

232;  Rule  concerning  rents, 
219;  Seizin,  184;  Sinking 
funds,  217;  Taxation,  233; 
Title  to  land,  181 ;  Valuation 
of,  216;  Watching  of,  231 

Recording  of  mortgages,  161 

Reddendum  in  a  deed,  182 

Regulation 

Of  safe  deposit  companies, 
89;  Of  savings  banks,  68; 
Of  trust  companies,  83 

Remainder,  estates  in,  179 

Rent,  see  Landlord  and  Tenant 
Accounts,  289;  Amounts  of, 
219;  Collection  of,  269;  Pay- 
able in  advance,  268;  Rule 
concerning,  219;  Securing  of, 
269 

Repairs,  239 

Requisites  for  safety,  99 

Responsibility 

Of  bondsmen,  156;  Of 
sureties,    273;   Of    tenants. 

Restrictive  indorsements,  37 
Reversion,  estates  in,  180 
Revocation  of  wills,  321 
Rights  of  taxpayers,  235 
Risks  in  fire  insurance,  245 
Rule 

As  to  rents,  219;  For  selec- 
tion of    bank,    16;    Funda- 
mental, 2 
Runs  on  savings  banks,  77 
Rural  homes,  194 


Safe  cost  of  homes,  195 

Safe  deposit  companies,  89 

Safety 

Margin  of,  100;  Of  mort- 
gages, 158 

Satisfaction  of  mortgages,  167 

Savings  banks,  68 

Balancing  of  pass-books,  75 ; 
Deposits,  72;  Distinguished 
from  banks,  14;  Drawing 
money,  73 ;  General  rule,  73 
Interest,  74 ;  Long-continued 
accounts,  77;  Panics,  77; 
Pass-books,  71;  Regulated 
by  law,  68 ;  Selection  of,  70 

Second  mortgages,  139 

Securing  of  rents,  267 

Securities 

Actual  and  fictitious,  106; 
Personal,  175;  Real  and 
ample,  100;  Titles  to,  143; 
Valuation  of,  102 

Security,  proper  sense  of,  106 

Seizin,  covenant  of,  184 

Semi-rural  homes,  194 

Severalty,  estates  in,  180 

Signatures,  21 

Signing  of  papers,  350 

Simple  homes,  194 

Sinking  funds,  217 

Special  assessments,  238 

Special  covenants  in  leases,  262 

Special  deposits,  19 

Speculation,  95 

Stability  of  values,  160 

State  banks,  14 

State  bonds,  124 

Statements  of  banks,  18 

Status 

Of  families,  304;  Of  married 
women,  336;  Of  non-resi- 
dents, 207 

Stock  of  corporations,  128 

Stocks  and  bonds,  121 

Subscribing  witnesses,  311 

Succession  tax,  322 


Index 


375 


Suggestions  to  married  women, 

341 
Sure  incomes,  109 
Sureties,  273 
Surety  companies,  273 
Surnames,  21 
Surpluses  in  banks,  17 


Tax 

Bills,  238;  Rates,  234;  Valua- 
tions, 234 

Taxation,  233 

Taxes 

How  paid,  238;  Penalties  and 
rebates,  238 ;  Remedies 
against,  237 

Temporary  investments,  94 

Temptation  to  speculate,  96 

Tenants,    see    Landlord    and 
Tenant 

Terms  of  leases,  264 

Testament,  295 

Testamentary  guardian,  297 

Testamentary  letters,  329 

Testamentary  trustee,  296 

Testator  and  testatrix,  296 

Time  deposits,  19 

Title,  181 

Titles,  examination  of,  145 

Transfer  tax,  322 

Trust  companies,  83 

As  executors,  83;  Drawing 
money,  87;  Interest,  88; 
Making  deposits,  85;  Powers 
of,  83;  Regulation  of,  84; 
Selection  of  84 

Trustees,  296 

Trusts,  128 

U 

Unimproved  real  estate,  221 
United  States  bonds,  123 
Unusual  provisions  in  wills,  310 
Usury,  113 


Validity  of  deeds,  182 
Validity  of  wills,  308 
Valuation  of  securities,  102 
Valuations  for  taxation,  234 
Value  of  money,  i 
Values,  comparative,  152 
Values,  fluctuations  in,  212 
Vivum  vadium,  137 

W 

Wards,  management  of  estates 

of,  325 

Wards,  trainmg  of,  326 

Warranty,  183 

Watching  of  real  estate,  231 

Will  and  testament,  296 

Wills,  294 

Bequests,  296;  Charitable 
purposes,  307;  Codicils,  296; 
Conditions  for  success  of,  299 ; 
Destruction  of,  321 ;  Devisee 
and  devisor,  296;  IDissolute 
children,  304;  Effect  of  mar- 
riage, 322;  Executor  and 
executrix,  296;  Guardians, 
314;  Legacies,  296;  Legal 
age,  309;  Litigation,  312; 
Memoranda  for,  299;  Mis- 
takes of  judgment,  302; 
Motives  for,  301 ;  Perpetuity, 
306;  Probating  of,  329; 
Reasons  for  making,  297; 
Revocation  of,  321 ;  Status  of 
families,  304;  Subscribing 
witnesses,  311;  Testator  and 
testatrix,  296;  Trustees, 
296;  Unusual  provisions, 
310;  Validity  of,  308 

Women,  married,  336 

Wrongly  written  indorsements, 
40 

Y 
I  Years,  estates  for,  179 


nB  Selection  from  the 
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G.  P.  PUTNAM'S  SONS 


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By  Helen  Campbell 


The  American  Girl's 
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A  Volume   Giving  Suggestions  and   Instructions  for 
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"  Brimful  of  ideas." —  Woman's  Journal, 
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From  tHe  days   of  A.\i^usta  to  tHe 
Present  Time 

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3y  Eugene  A.  HecKer 

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